EMEA morning briefing: Wall Street rebounds to support European equities

MARKET ENVELOPES

To watch:

EU foreign trade; Germany ZEW indicator; unemployment in the UK; no major company updates planned

Opening call:

Europe is poised for a positive open after US stocks reversed from a lower start to end Monday’s session with solid gains. In Asia, equities mostly followed the rebound on Wall Street; while the dollar, Treasury yields, oil and metals all fell slightly.

Shares:

European stocks are set to extend their winning streak on Tuesday, following the rebound on Wall Street.

U.S. stocks rebounded from a lower open on Monday, giving the Dow its longest run of gains since late May as investors pushed past weak data from China and U.S. data that missed forecasts. Asian markets echoed US gains early on Tuesday.

Stocks were supported by recent data showing that US inflation was slowing, although it was still quite high.

“Good inflation news following a very strong payrolls report in July has revived beliefs in a ‘soft landing’ for the economy,” UBS Global Wealth Management said.

“It’s an outcome we thought was at least as likely as a recession, and now markets are getting closer to pricing in that scenario. The risk is that markets get ahead, especially with the investor FOMO starting to kick in.”

Economic overview:

Morgan Stanley said supply chain pressures continued to ease.

The Morgan Stanley Supply Chain Index for July eased on “improvement in global raw material shipping costs, better delivery times and backlogs in some economies, and a emerging decline in container ship charter rates”.

He added: “Supply chains are still under stress and we are still far from normal levels, but the July print has confirmed the breakup we saw in June and we don’t see signs of the pace slowing down. improvement.”

Forex:

The dollar retreated slightly in Asia after strong gains on Monday, boosted by disappointing economic data from China.

HSBC said the dollar should remain strong as it is too early for the Federal Reserve to turn to lower interest rates. Even when the Fed does eventually cut rates, it’s unlikely to happen in isolation, with other central banks following suit.

“As such, it is likely that the USD could stay in the spotlight as the US is more resilient to slowing global economic momentum and other central banks appear to have more room to disappoint markets in the coming months.”

Obligations :

Treasury yields fell further in Asia, with the 10-year rate remaining below 2.8%.

In data released Monday, the New York Fed’s Empire State Manufacturing Index, an indicator of manufacturing activity in the state, fell in August, while a builder’s sentiment index of houses fell 6 points to 49, the first time it was below break-even. since May 2020.

“The start of the U.S. curve rates Fed hikes 25 basis points higher than at the end of July, but a funds rate peak of 3.5-3.75% still looks modest and the rate reversal after the first quarter of next year will only happen if the yield curve is at 100% just to warn of a coming recession,” Societe Generale said.

“[The] the current concern is that the path of least resistance is for the US interest rate market to get richer as Fed officials have no choice but to get tough in the face of a tougher market. very, very tense labor and far too high inflation.”

Energy:

Oil prices extended their decline at the start of Asian trade after economic data from China raised fears that a slowing global economy could reduce demand for energy products.

The data “does not bode well for oil demand, especially when the country remains so committed to zero-Covid,” OANDA said. “And with cases continuing to rise, the downward pressure on oil prices could intensify.”

Oil futures fell around 3% on Monday with prospects of a revival of the Iran nuclear deal, which could lead to an increase in global crude supply, also contributing heavy oil losses.

Read: Iran says some issues still pending as deadline for nuclear deal nears

Metals:

Gold futures fell further in Asia, after falling below $1,800 on Monday to settle at their lowest level in more than a week. However, losses were contained early on Tuesday as the dollar lost some traction.

Copper prices were slightly weaker in response to Chinese economic data.

Meanwhile, supply issues in Europe are likely to remain front and center as rising electricity prices have led many foundries to lose. “This could lead to further capacity reductions over the coming months,” ANZ said.

Most iron ore futures were slightly lower after data showed crude steel production fell 6.4% year on year in July, weighing on the iron ore market, a said ANZ.

Overall, the lack of a noticeable recovery in Chinese infrastructure investment has added to the headwinds the steel industry is expected to face in the coming months.

   
 
 

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The decisions were made public in Berkshire’s 13F filing, which was released after the stock market closed on Monday. The regulations require institutional investors managing more than $100 million to file the form, which shows the companies’ stock holdings at the end of the last quarter, as well as the size and market value of their positions.

   
 
 

There is no set path for Australian rate hikes, says RBA

SYDNEY – The Reserve Bank of Australia remains flexible on the scale and pace of future interest rate hikes, stressing in the minutes of its August 2 board meeting the need to react to the evolution of inflation outlook and employment data.

The minutes, released on Tuesday, repeated the RBA’s warning that the path to controlling inflation while maintaining economic growth is narrow.

   
 
 

Iran says some issues are still pending as deadline for nuclear deal nears

Iran said on Monday there were several problems with the draft text of the nuclear deal that the United States needed to iron out before Tehran could accept it, leaving the fate of reviving the nuclear deal still uncertain.

The European Union had set a deadline on Monday by which Iran, the United States and other countries in the 2015 deal had to say whether or not they would accept the deal, diplomats said. The EU last week circulated what it called a ‘final text’ on reviving the deal and sent the draft after four days of talks in Vienna, saying the 16 months of talks were now over. completed.

   
 
 

China relaunches military drills in response to latest US lawmakers’ visit to Taiwan

TAIPEI-The Chinese military reacted to the surprise arrival in Taiwan of a new delegation of American lawmakers by announcing a resumption of military exercises around the island, in the latest outbreak of tensions in the region.

The delegation, led by Senate Foreign Relations Committee member Ed Markey (D., Mass.), met with Taiwanese President Tsai Ing-wen on Monday to discuss maintaining regional stability and deepening U.S. trade. -Taiwanese, according to the Taiwan Presidential Office. The group arrived in Taipei on Sunday without previously announcing the two-day visit.

   
 
 

Ukraine urges civilians to leave Kherson as it prepares to retake territory from Russian control

KYIV, Ukraine-Kyiv is urging residents of the Russian-occupied Kherson region to leave before a winter exacerbated by shortages sets in and before a promised Ukrainian counteroffensive to retake the strategic area.

“Evacuate. A harsh winter is coming. We must help you, save you from the cold and from the enemy,” Deputy Prime Minister Iryna Vereshchuk said Sunday in Zaporizhzhia, a town near the frontline.

   
 
 

Write to [email protected]

   
 
 

Major events expected for Tuesday

06:00/UK: Monthly UK unemployment figures for July

07:00/SVK: June New orders in the industry

07:00/CZE: July PPI

07:00/SVK: Q2 GDP flash estimate

07:00/SVK: 2Q Flash estimate of total employment

08:00/BUL: July IPC

08:00/POL: June Trade in goods

09:00/GER: August ZEW Economic Sentiment Indicator

09:00/EU: June Foreign trade

23:01/UK: Jul Scotland Retail Sales Monitor

All times in GMT. Powered by Onclusive and Dow Jones.

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

 

(END) Dow Jones Newswire

August 16, 2022 12:16 a.m. ET (04:16 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.

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