EMEA Morning Briefing : Shares Seen Lower; Yen in Focus

MARKET WRAPS

Watch For:

EU monetary developments, business & consumer surveys; trading updates from H&M, Lloyds Banking Group, Currys, Bunzl, Serco Group

Opening Call:

Stock futures fell early Thursday. Asian stock benchmarks declined; the dollar and Treasury yields were steady; while oil and gold futures fell.

Equities:

European shares look set to fall at Thursday's open, tracking declines by Asian equities amid gains in global bond yields, while traders continue to watch for potential yen intervention by Japanese officials.

U.S. equity futures were also lower, with tech weighed by chipmaker Micron Technology sliding in after-hours trading. Revenue guidance for the company's August quarter matched estimates-and investors were likely expecting more.

Investors will be closely parsing data later this week on spending and the Federal Reserve's preferred inflation gauge for clues on the pace of price increases.

Forex:

The yen strengthened against other G-10 and Asian currencies after local media reported that Japan Finance Minister Shunichi Suzuki said earlier that sudden, one-sided yen moves are undesirable and that the authorities would take action as needed.

Media also reported that Suzuki said authorities are deeply concerned

about the impact of the yen's depreciation on the economy and are monitoring foreign-exchange movements with a high sense of urgency.

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Amid weakness in major Asian currencies and French election uncertainty weighing on the euro, "the US dollar index has broken through the downtrend dating back to November 2022," said David Scutt, market analyst at FOREX.com.

"Every time the buck has looked destined for the bin it found a way to rally, including this week," he said.

Bonds:

Treasury yields steadied early Thursday after a jump in yields overnight. ING said it wasn't clear what the driver was, given little macro data, no notable Fed comments, adding that this could be due to profit-taking ahead of PCE data on Friday.

Comments from Fed officials in recent days have generally shown a desire to see further evidence of cooling inflation before starting to cut borrowing costs from a 23-year high of 5.25% to 5.50%.

"We expect core inflation to be back to the 2% target by early next year, allowing the Fed to begin cutting interest rates from this September," said Paul Ashworth, chief North America economist at Capital Economics.

Energy:

Oil futures declined in Asia. Volatility in equity markets contributed to a rollercoaster ride in crude oil markets while a stronger USD added to the bearish picture, ANZ said.

Meanwhile, official U.S. data showed weekly gains in crude and gasoline supplies, and a decline in gasoline consumption.

A drop in U.S. exports due to tropical activity in the Gulf of Mexico last week, combined with lower refinery runs, "encouraged a third crude inventory build in four weeks," said Matt Smith, head U.S. analyst at Kpler.

Metals:

Gold futures edged lower early Thursday.

"It seems that gold has settled into a typical summertime trading range after a very hectic and impressive spring rally," said Brien Lundin, editor at Gold Newsletter. "In my view, the odds favor a continuation of this trading range for the next month or two," until Federal Reserve rate cuts come into view in the early fall.

That said, the gold charts show "narrowing volatility," he said. "In a price uptrend, this often presages a price breakout" and that's likely something to watch in the days just ahead.

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Beijing further relaxed curbs on home buying overnight, which may help investor sentiment and copper demand. However, whether the stimulus leads to increased home sales is unclear. The global outlook for manufacturing remains poor after weaker-than-expected PMIs in Europe and the U.S., ANZ said.

TODAY'S TOP HEADLINES

Biggest Banks Can Withstand Severe Downturn, $685 Billion in Losses, Fed Says

WASHINGTON-Big U.S. banks passed their latest annual stress test, with the Federal Reserve finding they would be able to continue lending to households and businesses in a severe recession, even while suffering steeper losses than last year's tests.

This year's exercise measured the 31 biggest banks' ability to maintain strong capital levels in a hypothetical recession marked by double-digit unemployment and a severe stock-market decline.

The Fed's Higher for Longer Policy Is Breaking the Yen

The Japanese yen is at a nearly four-decade low versus the U.S. dollar, and there's no sign of relief for the East Asian currency. It's a product of divergent monetary policy between the Bank of Japan and its developed-market peers-particularly the Federal Reserve.

The yen weakened to nearly 161 versus the dollar on Wednesday, a level last seen in 1986. The yen is down 14% versus the dollar in 2024 alone. It's a level at which the BoJ has intervened to support the currency in the past, by selling foreign-currency reserves, but there was no sign of an intervention on Wednesday.

The Shadowy Judicial System That Controls the Fate of WSJ's Evan Gershkovich

On Wednesday morning, Wall Street Journal reporter Evan Gershkovich entered a Yekaterinburg courtroom at the start of his secret trial. Television cameras crowded around him as he stood in a cage surrounded by bulletproof glass, his head newly shaved due to prison rules. Then the media was ushered out, leaving him with his defense team, the state prosecutor and one or more judges. Neither U.S. Embassy personnel nor the reporters' friends or fellow journalists were allowed to remain.

Gershkovich, a 32-year-old American journalist, was detained in Yekaterinburg in March 2023 on an espionage accusation that he, the U.S. government and The Wall Street Journal vehemently deny. The Russian authorities haven't publicly provided any evidence of his guilt.

Micron Stock Slumps Despite Strong Earnings

Micron Technology shares are losing ground despite the memory chip company reporting better-than-expected financial results for the quarter.

Results were strong, but Wall Street's expectations apparently got ahead of reality. Revenue guidance for the company's August quarter matched estimates-and investors were likely expecting more.

Amazon becomes only the fifth U.S. company to secure $2 trillion market cap

After all the recent attention on Nvidia Corp.'s market-capitalization milestones, now it's Amazon.com Inc.'s time to shine.

The e-commerce company crossed the $2 trillion market-capitalization threshold Wednesday, becoming only the fifth U.S. company to close at or above that level.

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Expected Major Events for Thursday

04:30/NED: Jun Producer confidence survey

06:00/NOR: May Labour force survey SA, incl unemployment

06:00/DEN: May Retail Sales Index

07:00/SWE: Jun Monthly Business Tendency Survey

07:00/SWE: Jun Consumer Tendency Survey

07:00/SVK: Jun Business tendency survey

07:00/SVK: Jun Economic sentiment indicator

07:30/SWE: Swedish repo rate announcement

08:00/ITA: Jun Consumer Confidence Survey

08:00/ITA: Jun Business Confidence Survey

08:00/EU: May Monetary developments in the euro area (M3)

08:00/ICE: Jun CPI

08:30/UK: May Capital issuance statistics

09:00/MLT: May PPI

09:00/ITA: May PPI

09:00/CYP: Apr Industrial Production Index

09:00/EU: Jun Business & Consumer Surveys - Business Climate Indicator & Economic Sentiment Indicator

09:30/BEL: Jun CPI

11:00/TUR: Turkish interest rate decision

12:30/CZE: Czech interest rate decision

23:01/UK: May Zoopla House Price Index

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 Newswires

06-27-24 0024ET