European Midday Briefing : China Property Woes Weigh on Mood

MARKET WRAPS

Stocks:

European stocks were lower on Monday, tracking falls in Asia on rising concerns about China's economic performance and fragile property sector.

China Evergrande scrapping its restructuring plan last Friday stoked concerns over mainland property developers.

Read China Evergrande's Shares Fall After Developer Scraps Restructuring Plan

Also weighing on risk appetite was the increasingly likely risk of a shutdown of the U.S. government, SEB said.

Read Kevin McCarthy Takes Final Shot at Avoiding Government Shutdown

Stocks to Watch

The Dutch government's tax boost plans are a negative for the investment case of ING and ABN Amro but don't make them unattractive, UBS said after proposals to increase the bank levy and introduce a share buyback tax was passed by the country's parliament. Read more .

U.K. banks need clarity on the implementation of the Basel 3.1 global banking reforms sooner rather than later to plan accordingly, Shore Capital said after the FT reported that the Bank of England plans to delay again the implementation of rules by six months, to July 2025. Read more .

U.S. Markets:

Stock futures fell as Treasury yields marched higher, maintaining pressure on stocks.

Investors will be looking to inflation data at the end of the week and monitoring negotiations in Congress over avoiding a government shutdown.

Stocks to Watch

HP lost about 2% premarket. Berkshire Hathaway has sold HP shares valued at about $130 million in recent days, a filing showed late Friday.

Warner Bros. Discovery, Paramount Global and Disney rose premarket after writers, studios and streamers said they had reached a tentative agreement that would end a monthslong strike. Shares in Netflix also gained.

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Forex:

The dollar stayed firm after the Fed last week flagged that interest rates could rise again before year-end and signalled that rates could stay high next year, Swissquote Bank said.

The big focus this week will be eurozone inflation figures on Friday, where any weakness could lift the dollar against the euro.

Equally, a higher-than-expected number is unlikely to lift the euro much as eurozone interest rates rising further could damage an already fragile economy, Swissquote added.

"That's a fear that will likely keep euro bulls away from the market for now."

Bonds:

Danske Bank Research expects long yields to gradually decline as the impact of interest-rate hikes on the economy and inflation becomes more pronounced and central bank rhetoric less hawkish.

"Our view remains that market pricing of 'stable' policy rates in both the U.S. and Europe is too high for the longer term, and we reckon market pricing will gradually converge towards our position over the next year."

Read Investors Might Need More Evidence of Macro Weakening to Add Duration

Energy:

Oil prices rose as investors bet that oil markets will become increasingly tight.

Speculative investors increased their net long positions on WTI by over 15,000 lots last week, suggesting they are anticipating higher prices.

Analysts pointed to signs of a tightening market prompted by the efforts of Saudi Arabia and Russia to constrict the flow of oil and its derivatives to the global market.

"The oil market has held relatively steady in recent days with tightness in the physical market coupled with Russia's recent export ban on diesel and gasoline offset by a fairly hawkish [FOMC] meeting last week," ING said.

Metals:

Metal prices slipped as concerns over demand and the global economy continued to compound prices for industrial goods.

"The Fed is hawkish, and the macro environment is bearish ahead of a possible U.S. government shutdown next weekend," Peak Trading Research said.

Rising energy prices, a stronger dollar and interest rates being at a decade high are adding to the bearish sentiment, it said.

DOW JONES NEWSPLUS

EMEA HEADLINES

German Business Sentiment Worsened for Fifth-Straight Month in September

Business sentiment in Germany weakened even further in September, the fifth consecutive month of decline, with the economic outlook remaining bleak in Europe's largest economy, according to a survey of companies.

The Ifo business-climate index declined slightly to 85.7 in September from a revised 85.8 in August, data from the Ifo Institute showed Monday.

Entain Sees Good Underlying Growth in Online Business Despite Lower Revenue Increase

Entain said it continued to see good underlying growth in its online business despite softer-than-anticipated revenue growth in the third quarter and the continued roll-out of gambling regulations, and backed its Ebitda expectations for the year.

The FTSE 100 betting-and-gambling group said Monday that, among other things, regulatory headwinds are persisting longer than expected, especially in the U.K. It added that online net gaming revenue has been softer than anticipated as adverse sporting results hurt sports margins in September.

How Much Will It Cost to Defeat Inflation?

LONDON-Central banks around the world appear to be nearing the end of a series of interest-rate rises, but the economic cost of the battle against inflation is only beginning to emerge, with mounting signs that Europe could be among the hardest hit.

Adding to those signals were surveys released Friday suggesting that Europe's economy contracted in the three months through September.

Europeans Love Green Policies-Until the Bill Comes Due

LONDON-For years, Europe has been at the forefront of the global drive to curb carbon emissions and slow climate change, pledging to reach net zero emissions by 2050. Overwhelming numbers of Europeans say they like the idea.

Now, however, a small but growing backlash suggests a more complicated truth: Voters may like the idea more than the reality. As the time draws near to take concrete actions and the costs of the transition become more visible, some members of the public and politicians will get cold feet.

GLOBAL NEWS

U.S. Economy Could Withstand One Shock, but Four at Once?

The U.S. economy has sailed through some rough currents this year but now faces a convergence of hazards that threaten to create more turbulence.

Among the possible challenges this fall: a broader auto workers strike, a lengthy government shutdown, the resumption of student loan payments and rising oil prices.

Why Are Tech Stocks Down? Bond Yields Are Up

The summer slide in U.S. government bond prices has intensified since Labor Day, rattling some of the hottest parts of the stock market.

Many investors had hoped for some autumn relief to nearly two years of declines that have repeatedly pushed Treasury yields above Wall Street's expectations. Now, yields on 10-year notes-a key benchmark for borrowing costs on everything from mortgages to corporate loans-have hit 16-year highs around 4.5%. At the same time, yields on shorter-term Treasurys have also jumped, with the two-year yield above 5%.

U.S. Shared Intelligence With Canada After Alleged Assassination of Sikh Separatist

WASHINGTON-Canadian intelligence agencies intercepted communications among Indian diplomats indicating that New Delhi was involved in the killing of a Sikh separatist leader in British Columbia earlier this year, a Western official familiar with the matter said.

Those intercepts, combined with a stream of intelligence shared by the U.S., led Canada's prime minister, Justin Trudeau, to publicly accuse India of playing a role in the shooting of Hardeep Singh Nijjar, who was gunned down in the parking lot of a Sikh temple.

Strategy to Counter China in Pacific at Risk in Congress Budget Fight

WASHINGTON-Count as another looming casualty of the House Republicans' budget fight a U.S. effort to fortify its influence in the Pacific against China.

The Biden administration is racing to finish an updated economic assistance pact with the Marshall Islands, to complement similar agreements reached with Palau and the Federated States of Micronesia. The three archipelagic nations occupy part of a strategic expanse of ocean between Hawaii and the Philippines and host critical U.S. military facilities. The administration is seeking $7.1 billion over 20 years to renew the three pacts starting in the fiscal year that begins Oct. 1.

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

(END) Dow Jones Newswires

09-25-23 0604ET