European Midday Briefing : Stocks Steady as Focus Turns to U.S. Jobs

MARKET WRAPS

Stocks:

Europe's main stock indexes were mixed on Friday, struggling for momentum with the spotlight on U.S. jobs data.

A reading that isn't too strong would add to expectations the Federal Reserve will cut interest rates this month.

IG said markets are hoping for a 'Goldilocks' outcome "that would neither rule out a rate cut nor raise concerns about economic weakness."

Stocks to Watch

Reports that Generali is exploring opportunities in asset management confirm its strong focus on growing its asset and wealth management division, Equita said.

After a Financial Times story reported last week that Generali has been in early stage talks with France's Natixis about a potential tie-up, Milano Finanza said the Italian insurer is considering two or three potential targets in the U.S. to solidify its expertise in specific asset classes such as private debt and alternative assets.

"Any such operation would still be relatively small in size and would not preclude discussions with Natixis," Equita said.

Market Insight

The global battery sector will likely see stronger demand next year, HSBC Global Research said.

HSBC expects the lithium-ion battery industry's utilization rate to recover to 57% next year from 52% this year. In addition, capacity expansion overseas will also accelerate on concerns of potential U.S. tariff hikes on Chinese battery imports.

U.S. Markets:

Stock futures posted small moves while bond yields were little changed. The benchmark 10-year yield has settled at about 4.18% for two straight sessions.

As well as the November jobs report, the data docket also includes a preliminary gauge of consumer sentiment for December.

Forex:

The euro's rebound above $1.0550 provides it with a buffer which could limit its falls in the event of strong U.S. payrolls data at 1330 GMT, UniCredit Research said.

A solid rise in payrolls for November after October's weak figure due to weather and strikes would likely put a lid on the euro's recovery. However, the data are unlikely to be strong enough to pull the euro below $1.0500, UniCredit said.

The dollar was steady in cautious trade before the U.S. jobs data, where a weak reading could cause a temporary fall, ING said, although it is unlikely to be long before the currency rises again.

ING said a rise of under 200,000 jobs would probably be considered a "bad number," while a rise above 300,000 would be a "good number."

It advises using any dollar falls as an opportunity to buy back the currency.

Bonds:

The political turmoil in France should support Bunds for now, although a drop below 2% for the 10-year yield might not be imminent, SEB Research said.

Such a scenario could emerge if markets start to anticipate a terminal deposit rate of 1.25% or lower for the European Central Bank, SEB said.

"Our base case is for the German 10-year yield to fluctuate a tad above 2% in the near term and trade around 2.4% in the second half of 2025."

The prospect of more joint funding at the European level for defense, is boosting the convergence trade, enabling the 10-year Italian BTP-German Bund yield spread to narrow further, Commerzbank Research said.

"The convergence momentum remains strong also given the overriding demand for carry," it said. adding that although initiatives at the EU level will take time, investors will probably be keen to buy into setbacks.

Energy:

Oil continued to trade in a tight range despite OPEC+'s decision to push back a series of supply increases amid growing concerns over weaker demand and a looming supply surplus.

"The action taken by OPEC+ eats quite heavily into the surplus that was expected over 2025," ING said.

"However, the extension and the slower return of barrels is not enough to push the market into deficit next year."

Slower demand growth and strong non-OPEC+ supply are still expected to leave the market oversupplied in the first half of next year. The projected surplus is now estimated at around 500,000 barrels a day compared with 1 million barrels a day previously, ING said.

Metals:

Gold recovered some ground after coming under renewed pressure due to Jerome Powell's more cautious stance on lowering rates.

"Investors will be closely watching job data due today. Surprisingly strong nonfarm payroll data could drag prices below $2,600/oz."

Prices are currently supported by expectations of a 25-basis-point Fed rate cut this month, coupled with a softer risk tone and higher demand for safe-haven assets amid concerns over U.S. trade tariffs and geopolitical turmoil.

EMEA HEADLINES

German Industrial Production Retreated in October, With Threats Mounting

German industrial production fell again in October as the sector continued to struggle, with swathes of layoffs and potential trade tariffs threatening to compound the problem.

Output dropped 1.0% on month in October, German statistics agency Destatis said Friday, weaker than the 1.0% uptick expected by economists in a poll compiled by The Wall Street Journal. Production declined by 2.0% in September, and by 0.4% in the three months to October.

Direct Line Agrees to Aviva's Sweetened $4.6 Billion Takeover Offer

Direct Line agreed to an improved takeover bid from Aviva valuing the nonlife insurer at 3.61 billion pounds ($4.61 billion), the companies said.

Insurer and asset manager Aviva won over its smaller rival with a cash and shares offer worth 275 pence a share, 10% higher than its previous approach. Both parties have reached a preliminary agreement on the terms of a potential deal, they said in a joint statement on Friday.

Frasers to Launch Takeover Bid For Norwegian Sports Retailer XXL

Frasers Group said it would launch a takeover bid valuing the Norwegian sports equipment retailer XXL at around $22 million as it moves to prevent the Oslo-listed company from proceeding with a dilutive capital-raising plan.

The U.K. sports-fashion retailer said it would offer 10 Norwegian kroner ($0.91) a share for the XXL shares it doesn't already own, representing a 25% premium to Thursday's closing price and valuing the company at 246.4 million kroner.

Volkswagen Faces More Warning Strikes Monday

The union representing Volkswagen employees said there would be more warning strikes at nine German sites on Monday as the dispute with the carmaker over how to cut costs persists.

Volkswagen has been at loggerheads with the IG Metall union for weeks as the company, one of Germany's biggest employers, seeks to implement domestic cost cuts amid sluggish electric-vehicle demand and competition from Chinese rivals.

GLOBAL NEWS

Why a 'robust' jobs report for November probably wouldn't derail Fed rate cut

A "decently robust" U.S. jobs report on Friday probably wouldn't derail the Federal Reserve from delivering an interest-rate cut this month, as the Fed's policy rate remains restrictive, according to Russ Brownback, head of global macro positioning for fixed income at BlackRock.

"The broad consensus is that that data is going to be strong on Friday, with a real bounce back," said Brownback by phone. "The data for October was brought down by the terrible weather and the strikes," he said, referring to employment disruptions from hurricanes and striking workers.

Is This Wildly Overvalued Stock Market Doomed? Yes, but Maybe Not Yet

Here are two particularly scary forecasts for investors: Goldman Sachs thinks the S&P 500 will make just 3% a year over the next 10 years, as Big Tech dominance eventually falters. Bank of America expects 0%-1% a year for a decade, a catastrophic investment prospect.

Their conclusion: Buy stocks anyway, because the next year looks great.

Trump Plans to Appoint Musk Confidant David Sacks as AI, Crypto Czar

President-elect Donald Trump named a Silicon Valley investor close to Elon Musk as the White House's artificial intelligence and cryptocurrency policy chief, signaling the growing influence of tech leaders and loyalists in the new administration.

David Sacks, a longtime venture capitalist who worked with Musk at PayPal more than two decades ago, will serve as the "White House A.I. & Crypto Czar," Trump said on his social-media platform Truth Social.

Syrian Rebel Offensive Bolsters Turkey's Geopolitical Influence

A rapid advance by Syrian rebels in recent days is giving the NATO member Turkey more power to limit Russian and Iranian influence in the region, but also risks triggering new instability on Ankara's doorstep.

Turkey has longstanding relations with rebels who entered the city of Hama on Thursday and captured Syria's second largest-city, Aleppo, days earlier. The offensive marks the stiffest challenge in years for the regime of Syrian President Bashar al-Assad, which is backed by Moscow and Tehran.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

12-06-24 0524ET