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EMEA Morning Briefing: Stocks may drop after gains reversed overnight

EMEA Morning Briefing: Stocks may drop after gains reversed overnight

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Whatch out:

Detailed analysis of Germany’s GDP, GfK Consumer Climate Survey; survey of consumer confidence in France and Italy; Business Confidence Survey in Italy; Circulation Update from DS Smith

Opening call:

European stocks may decline at the opening on Friday. In Asia, stock indices were mixed. The dollar fell. While oil and gold advance. US bond markets were closed on Thursday for the Thanksgiving holiday.

Stock:

Stocks could fall in Europe on Friday, after posting overnight gains in a quiet session with US markets closed for the Thanksgiving holiday.

“The latest German business climate survey released in the morning from Ifo provides reasons for optimism just a day after the release of PMI surveys eased fears of a severe recession in the region,” IG said.

Market analysts do not see the minutes from the latest Fed meeting shed any new light on the policy debate.

“There wasn’t a lot of new information,” said Oxford Economics. “Policy makers appear poised to slow the pace of rate hikes. This reflects comments from Fed officials since the last meeting and is consistent with our expectations for a 50 basis point rate hike in December.”

Another key focus for investors is the Chinese government’s response to a surge in Covid-19 cases, as the country now grapples with the worst outbreak of the virus.

The authorities’ tough response dashes hopes of an economic recovery and fuels concern about disruption to global supply chains.

Forex:

The dollar weakened slightly on Friday amid lack of major US economic data or FOMC speeches to influence views on FOMC policy, the CBA said.

Meanwhile, the recent sell-off in the dollar has played a big role in the recovery of the pound’s exchange rate, according to TickMill UK.

“With some high-profile names buying GBP on its September lows, it is likely that more cautious players will join in the move as the price is now heading higher, which should keep the pair supportive in the near term,” said TickMill.

The next US inflation reading will be key for GBP/USD. TickMill added that further subdued inflation could prompt the Fed to raise interest rates smaller in December while higher inflation could keep a bigger hike on the table.

Bonds:

US bond markets were closed Thursday for the Thanksgiving holiday and will close early on Black Friday.

Meanwhile, better-than-expected German Business Confidence data left bond investors unfazed, with eurozone government bond yields continuing to fall.

Investors are increasingly expecting central banks to slow down interest rate increases after the US Federal Reserve’s meeting minutes on Wednesday showed that the vast majority of policymakers expect slower rate hikes to be “appropriate soon.”

HSBC Global Private Banking is rebalancing towards bonds before interest rates peak.

“We think short maturities are the sweet spot, as they include almost all of the price hikes we would expect to see, while extending the term will increase volatility without giving investors more returns,” he said.

energy:

Oil rose in Asia amid mild dollar weakness, and after European Union energy ministers failed to reach agreement on Thursday on a plan for an emergency natural gas price cap, saying they would resume discussion next month.

But analysts said gains may be limited.

ANZ Research said road traffic in China has been drifting downward in recent weeks amid rising Covid-19 cases, which could be a major drag on oil demand.

She added that the demand for gasoline in the United States is also declining with the end of the travel season there.

minerals:

Gold gained some ground in Asia after falling earlier due to possible central adjustments, with lower Treasury yields likely to provide support.

The precious metal has benefited greatly from the Fed’s “pacifist pivot” if it can even be called that, as policymakers appear to support a slower pace of tightening, which was supported by the FOMC minutes, Oanda said.

Copper prices rose slightly as the easing of the dollar’s strength made the metal more affordable, adding to its appeal.

Although a weaker US dollar could help spur investors’ appetite for copper, gains may be limited as Chinese smelters were able to negotiate higher fees for copper positions, ANZ said.

Chinese iron ore futures rose in early trade, as sentiment on the real estate sector improves amid support for funding from state-owned lenders.

Everbright Futures said the currently low inventory levels of raw materials also led to market expectations of restocking demand ahead of the Lunar New Year in January.

   
 
 

Today’s headlines

China’s recovery through a record-breaking coronavirus outbreak has slowed as lockdowns spread

SINGAPORE – Widespread lockdowns imposed across China as authorities there this week struggle to contain the country’s largest outbreak of Covid-19 threatens to once again create uncertainty in global supply chains and dampen global economic growth prospects.

Beijing’s fight to contain the virus – including tough restrictions on daily life and commerce in cities from the major port city of Tianjin in the north to Guangzhou in the south – comes as economies elsewhere lose speed as central banks raise interest rates to fend off inflation.

   
 
 

Disagreement between European energy ministers over the proposed maximum gas price

European Union energy ministers failed to reach agreement on Thursday on a plan for an emergency natural gas price cap, saying they would resume discussions next month.

EU diplomats are also struggling to agree on a separate international plan to reduce the prices paid for Russian oil around the world.

   
 
 

Expanding the French McKinsey probe to include campaign financing

French prosecutors have opened investigations into the role consulting firms played in the 2017 and 2022 French presidential elections, broadening an existing investigation into the consulting firm McKinsey & Co.

Earlier this year, French financial prosecutors opened an investigation into tax fraud and money laundering at McKinsey.

   
 
 

Adidas to investigate allegations of misconduct against Kanye West

Adidas AG has launched an investigation into alleged inappropriate behavior by Kanye West while the sportswear giant was working with the musician to develop and sell a line of Yeezy sneakers.

On Thursday, the company said it would launch an investigation after receiving an anonymous message. The letter alleged that Mr. West, who went by Yee, had carried out years of misconduct in the workplace, and that Adidas management had turned a blind eye to his behaviour.

   
 
 

VW faces a new problem in China: local competitors

BERLIN-Volkswagen AG is losing market share to domestic automakers in China, its largest single market, presenting the German automaker’s new CEO with one of his toughest challenges.

Despite some sales gains in recent months, Volkswagen said it expects its market share in China to be around 16% this year. That’s down by about a fifth since 2019, when it was about 20%, according to data provided by Jato Dynamics, a consumer research group. Volkswagen, which has the largest market share of any foreign automaker in the country, owns well-known brands there such as Volkswagen, Skoda, Porsche, Audi, and Bentley.

   
 
 

The regulator says Tesla is recalling about 80,000 cars in China

Tesla Inc. withdraws About 80,000 vehicles are in China because of software and seatbelt issues, days after US regulators asked the company to recall hundreds of thousands of vehicles.

The electric vehicle maker, China’s second largest by sales, has submitted its recall plan to the State Administration for Market Regulation, the Chinese regulator said Friday.

   
 
 

Elon Musk says he will reinstate suspended Twitter accounts

Elon Musk has said he will reinstate suspended accounts on Twitter Inc.’s social media platform.

Mr. Musk said Thursday that pardons will begin next week, provided the accounts have not “breaked the law or engaged in egregious spam.” The decision was made after surveying the opinions of users on the platform. He wrote on Twitter the phrase “Vox Populi, Vox Dei” which is a Latin phrase that means the voice of the people is the voice of God.

   
 
 

The Twitter Exodus hits teams charged with organizational and content issues globally

Elon Musk’s move to purge employees of Twitter Inc. Those who do not embrace his vision have led to a wave of departures among policy staffers and safety issues around the world, prompting questions from regulators in key jurisdictions about the site’s ongoing compliance efforts.

The scrutiny has been particularly close in Europe, where in recent years officials have taken on a greater role in regulating big tech companies.

   
 
 

Write to singaporeeditors@dowjones.com

   
 
 

Major events expected for Friday

00:01 / UK: October Monthly UK car manufacturing figures

07:00/GER: Third Quarter GDP – Detailed Distribution

07:00 / DEN: retail sales index for October

07:00 / Switzerland: October PPI

07:00/GER: Dec GfK Consumer Climate Survey

07:45 / FRA: November Consumer Confidence Survey

08:00 / SPN: Oct PPI

8:00 a.m./HUN: Oct. Employment and Unemployment

09:00/POL: Oct Unemployment

09:00 / ITA: Consumer Confidence Survey for November

09:00 / ITA: Business confidence survey for November

09:30 / UK: October Capital Issues Statistics

10:00 a.m. / LUX: September Trade

10:00/ITA: Oct. Foreign trade outside the EU

10:00 / CRO: 3Q Flash Estimate GDP

10:00 / CRO: 3Q GDP

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

 

(end) Dow Jones Newswires

November 25, 2022 00:17 ET (05:17 GMT)

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