EMEA Morning Briefing: Investors Parse Fed Officials' Comments, Nvidia
MARKET WRAPS
Watch For:
EU Flash consumer confidence indicator; U.K. public sector finances; France monthly business survey; trading updates from International Distribution Services, Halma, JD Sports Fashion, Julius Baer Group, Investec
Opening Call:
European stock futures were slightly higher despite a broadly negative lead from Asian stock benchmarks; The dollar weakened; Treasury yields were mixed; while oil was mixed and gold gained.
Equities:
European stock futures edged higher early Thursday as concerns over the escalation of the Russia-Ukraine conflict persisted.
Leading into Nvidia's earnings yesterday, investors seemed to be in a wait-and-see mode. The U.S. stocks closed mixed. However, the earnings didn't live up to the hype. While the chip maker beat expectations for sales and profit in its latest quarterly earnings report, released after the closing bell, its shares sold off in after-hours trading. That was likely a sign that it didn't live up to the lofty expectations of investors who have piled into Nvidia stock this year on a wave of AI hype.
Investors also parsed Fed officials' comments for cues on the trajectory for rate cuts ahead. Boston Fed President Susan Collins said she saw sees risks of both an inflation rebound or a further softening of the U.S. labor market, and expects to continue to gradually lower interest rates.
However, Fed's Michelle Bowman said that inflation still dominated her concerns about the economy, arguing for a cautious approach to further rate cuts by the central bank.
On tap today is the EU Flash consumer confidence indicator.
Forex:
The dollar was slightly weaker early Thursday. The greenback remains underpinned by still-high Treasury yields amid global uncertainties, MUFG said.
BBH analysts said, "there is greater room for an upward reassessment in US interest rate expectations relative to other major economies."
The Atlanta Fed's updated projection of 2.6% GDP growth this year, up from 2.5% previously, compares with a long-run trend of 1.8%, BBH said.
Rising Treasury yields also support the dollar. Meanwhile, Governor Lisa Cook fails to give a clear hint about whether the Fed will cut or hold rates next month.
Bonds:
U.S. government debt sold off on Wednesday, sending yields up by the most in a week, as geopolitical anxiety eased and investors awaited President-elect Donald Trump's pick for Treasury secretary.
The latest leg higher was powered by a belief that Trump's policies may boost economic growth and raise inflation. Central to how this shift in economic strategy will be managed is the nomination of the U.S. Treasury secretary, so investors are eager to see which of Trump's potential picks prevails.
Traders now see a 48% chance of no Fed action next month. A week ago, the chance of a 25 basis points rate cut was at 82.5%.
Energy:
Oil was mixed in Asia amid rising geopolitical tensions in Europe.
The ongoing escalation of the Russia-Ukraine conflict could impact the oil market as traders assess the possible developments, said Exness' Terence Hove.
The potential disruption of Russian oil exports could spur supply worries, the financial markets strategist said.
Also, a rebound in China's oil demand, with crude imports likely to reach near-record levels by end-November, could contribute to a more bullish sentiment, Hove added.
Metals:
Gold edged higher in Asia. The Russia-Ukraine war is re-emerging as a key support factor for gold, with safe-haven demand likely to strengthen, DHF Capital's Bas Kooijman said.
On the other hand, pressure from a stronger U.S. dollar remains persistent, Kooijman said. Robust economic data and concerns over potential tariffs and tax cuts could heighten inflationary risks and lead to a potential pause in Fed rate cuts--creating additional downward risks for non-interest-bearing gold in the near term, he added.
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Aluminum was flat. Investors have been anticipating the potential impact of China ending tax-export rebates on aluminium semi-manufactured products. Chinese fabricators have rushed to front-load exports ahead of the tax rebate cut in December, ANZ research analysts said.
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Iron ore prices were higher amid positive sentiment. The Chinese city of Guangzhou has expanded its program of buying old apartments, ANZ Research analysts said, adding that this would be positive for higher demand for construction-related materials.
TODAY'S TOP HEADLINES
Fed's Bowman Sees U.S. Inflation Remaining as Prime Economic Concern
Federal Reserve Gov. Michelle Bowman said that inflation still dominates her concerns about the economy, arguing for a cautious approach to further rate cuts by the central bank.
Bowman cast a rare dissenting vote when the Fed decided on a half-percentage-point cut in September, but she joined the rest of the Fed's rate-setting committee in supporting the central bank's quarter-point cut earlier this month. Speaking at the Forum Club of the Palm Beaches in West Palm Beach, Fla., on Wednesday, Bowman said she still thinks prices are rising too fast.
Boston Fed President Sees Risks of Both Inflation and Soft Labor Market
Federal Reserve Bank of Boston President Susan Collins sees risks of both an inflation rebound or a further softening of the U.S. labor market, and expects to continue to gradually lower interest rates while policymakers feel out the situation.
"While the final destination is uncertain, I believe some additional policy easing is needed, as policy currently remains at least somewhat restrictive," Collins said at the University of Michigan's Gerald R. Ford School of Public Policy in Ann Arbor, Mich., on Wednesday. "The intent is not to ease too quickly or too much, hindering the disinflation progress to date. At the same time, easing too slowly or too little could unnecessarily weaken the labor market."
An Immigration Crackdown Risks Sapping Farms' Vital Source of Labor
The agriculture industry is working to avert a potential labor crunch following threats from President-elect Donald Trump to launch a mass deportation of migrants after he takes office.
America's food-supply chain relies on a predominantly immigrant workforce for some of its most challenging jobs, such as picking fruit, applying pesticides on crops, operating machinery and slaughtering livestock. About two-thirds of U.S. crop-farm workers are foreign-born, and 42% aren't legally authorized to work in the country, according to a Labor Department report.
Chinese-Registered Ship Is Held in Baltic Sea Sabotage Investigation
A Chinese ship that sailed over two severed data cables in the Baltic Sea around the time they were cut has been stopped by the Danish navy as part of an international investigation into what police say is a possible act of sabotage.
The two fiber-optic data cables-one that connected Denmark and Lithuania, the other Finland and Germany-were severed in quick succession on Sunday and Monday, causing minor disturbances in internet traffic and triggering a multinational manhunt involving investigators in Sweden, Denmark, Finland and Germany, according to several officials.
Google Should Be Forced to Sell Chrome Browser, Justice Department Says
The Justice Department on Wednesday said Google should have to sell off its popular Chrome browser as part of a court-ordered fix to its monopolization of the online search market.
The request follows the government's victory this year in an antitrust case against Google and is likely to kick off a heightened legal fight with wide-reaching implications for the tech giant's core business.
Elon Musk's xAI Startup Is Valued at $50 Billion in New Funding Round
Elon Musk's artificial-intelligence startup, xAI, has told investors it raised $5 billion in a funding round valuing it at $50 billion-more than twice what it was valued at several months ago.
Qatar's sovereign-wealth fund, Qatar Investment Authority, and investment firms Valor Equity Partners, Sequoia Capital and Andreessen Horowitz are expected to participate in the round, according to people familiar with the matter. The financing brings the total amount xAI has raised to $11 billion this year.
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Expected Major Events for Thursday
05:30/NED: Oct Unemployment
05:30/NED: Nov Consumer confidence survey
07:00/EU: Oct New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)
07:00/SWE: 3Q Industrial capacity utilization
07:00/UK: Oct Public sector finances
07:00/DEN: Nov Consumer expectations
07:00/DEN: 3Q Labour force survey
07:00/NOR: 3Q Labour Cost Index - preliminary figures
07:00/NOR: 3Q GDP
07:45/FRA: Nov Monthly business survey (goods-producing industries)
08:00/SPN: Sep Industrial Orders & Turnover
09:00/ICE: Oct Harmonized CPI
10:00/MLT: Oct Registered Unemployed
10:00/BEL: Nov Consumer Confidence Survey
11:00/UK: Oct Aluminium Production report
11:00/FRA: 3Q OECD Quarterly National Accounts: GDP growth
11:00/UK: Nov CBI Industrial Trends Survey
11:00/TUR: Turkish interest rate decision
15:00/EU: Nov FCCI Flash Consumer Confidence Indicator
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This article is a text version of a Wall Street Journal newsletter published earlier today.