European Midday Briefing : Hawkish Central Bankers Keep Stocks in Check

MARKET WRAPS

Stocks:

Most major European stock markets were cautiously higher on Thursday, with gains capped by some hawkish comments from central bank officials, including Jerome Powell.

"The main [central] banks have continued to push the story that they're going to be relatively hawkish and have a couple of hikes still in the pipeline," Arbuthnot Latham said.

In the U.K., the FTSE 100 edged lower as concerns about potential damage to the U.K. economy due to restrictive interest rates weighed on sentiment.

"Central bank comments proved to be a reminder that further rate rises are likely, thus putting pressure on a teetering economy," Interactive Investor said.

U.S. Markets: Markets:

Stock futures were little changed, while Treasury bonds edged up, as investors continued to digest comments by global central-bank chiefs.

Thursday's session will feature jobless claims and pending home sales data, alongside a revision to first-quarter GDP numbers..

Stocks to Watch

BlackBerry reported first-quarter adjusted earnings of 6 cents a share, beating analysts' calls for a loss of 6 cents. Its shares rose 18.

JPMorgan Chase rose 1.5%, Bank of America gained 1.3%, and Wells Fargo was up 1% after the Federal Reserve's annual stress test showed the U.S. banking system remains strong.

Micron Technology reported a fiscal third-quarter loss that was narrower than expected by analysts and the stock was rising 3.2% in premarket trading.

Virgin Galactic rose 4.2% in premarket trading ahead of the space-tourism pioneer's first commercial space flight

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Forex:

The Swedish krona fells to its weakest level in more than a decade after the Riksbank raised its policy rate by 25 basis points to 3.75%, disappointing some in the market who had anticipated a 50bp rise.

The falls came even as the Riksbank said rates would rise at least once more this year and opted to increase the pace of government-bond sales from September.

The central bank separately announced it was considering hedging around a quarter of its foreign-exchange reserves.

Read Riksbank Lifts Rate, Signals Further Tighening

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TD Securities expects a "choppy but lower" dollar in the second half of the year, emphasizing likely gains for Latin American and emerging-market Asian currencies as well as the euro.

"Disinflation is the main driver and sending the strongest directional H2 cue for the dollar," TD said. "The main FX theme centers on the outperformance of global carry, where EM holds the most weight."

TD still expects EUR/USD to rise to 1.13 by year-end, from 1.0913 currently, and USD/CAD to fall to 1.30, from 1.3274 currently. TD slightly raised its year-end USD/JPY forecast to 134, versus a current USD/JPY level of 144.670.

Read Thames Water Struggles Offset Prospect of Higher Rates For Pound

Bonds:

Eurozone government bond yields edged higher, with the focus on German inflation data, said UniCredit Research, which expects to see yield curve flattening if the CPI surprises to the upside.

Fixed income markets have shown moderate weakness after the release of the North Rhine Westphalia inflation data, "which suggests slight upside risks to the nationwide reading and highlights the high sensitivity of this topic," UniCredit Research said.

Energy:

Crude futures inched lower as investors took profits following Wednesday's sharp run-up, but they remained concerned about the impact of rising interest rates on oil demand.

Metals:

Base metals and gold edged lower, with the economic environment turning more bearish "via a strong dollar, softer inflation expectations, and weaker commodity currencies," Peak Trading Research said.

Peak added that much of this comes has come from hawkish central-bank rhetoric, with bond markets now pricing an 80% chance the Federal Reserve hikes rates next month.

DOW JONES NEWSPLUS

EMEA HEADLINES

Renault Upgrades Its 2023 Financial Outlook

Renault upgraded its 2023 financial outlook on Thursday as the French car maker said its level of performance is above initial expectations.

The company said it now sees its 2023 operating margin between 7% and 8% compared with superior or equal to 6% previously.

H&M 2Q Earnings Beat Forecasts, Summer Collections Help 3Q Get off to Good Start

Sweden's Hennes & Mauritz said Thursday its fiscal third quarter has got off to a good start thanks to well-received summer collections after it reported a smaller-than-expected drop in second-quarter net profit.

The fashion retailer posted a net profit of 3.3 billion Swedish kronor ($306 million) for the quarter to May 31 compared with SEK3.68 billion a year earlier. Analysts polled by FactSet had expected SEK2.89 billion.

Casino Proposes Converting Debt to Capital as Part of Conciliation Proceedings

Casino Guichard-Perrachon said late on Wednesday that it sees necessary to convert unsecured and secured debt into capital in order to have a debt structure compatible with its business plan to 2025.

The proposal, made to stakeholders as part of the French company's conciliation proceedings, relate to between 1 billion and 1.5 billion euros ($1.09 billion-$1.64 billion) of secured debt and to around EUR3.6 billion of unsecured debt instruments.

U.S. Companies Face EU Deforestation Rules on Coffee, Wood and Other Everyday Goods

Companies selling everyday products such as leather shoes, coffee and chocolate in the European Union will soon need to prove their wares aren't causing forest loss under a new law, after voluntary efforts largely failed.

The world's toughest rules on deforestation come into force Thursday, meaning that companies have 18 months to prepare for proving the origin of seven commodities imported into the EU that are known to drive forest loss: cattle, cocoa, coffee, palm oil, soy, rubber and wood.

Big Oil Mulls a Slippery Future

When is it game over for oil? Don't expect a clear answer from the people with the most to lose from a shift to cleaner fuels.

Within energy circles, estimates of how much oil will be needed in 2050 range anywhere from 80% less than today to business as usual. Investors have the difficult job of betting which companies are on the wrong side of the most important trend for the sector in decades.

Netanyahu Revives Judicial Overhaul Stripped of Most Controversial Piece

JERUSALEM-Israeli Prime Minister Benjamin Netanyahu said he would drop the most controversial part of his plan to remake the country's court system, pushing ahead with legislation stripped of a provision that would have given the national legislature the power to overturn rulings by the Supreme Court.

"It's out," Netanyahu said in an interview with The Wall Street Journal that also touched on relations with the U.S., his decision not to supply weapons to Ukraine and his concerns about deepening ties between Russia and Iran.

GLOBAL NEWS

Jerome Powell Says Bank Failures Underscore Need for Stronger Regulation, Supervision

Federal Reserve Chair Jerome Powell said the failures of Silicon Valley Bank and two other midsize lenders this spring underscore the need for strong capital buffers to ensure the banking system is resilient during times of stress.

"The events of the past couple of months would have been much more difficult to manage had the largest banks been undercapitalized or illiquid," Powell said in remarks prepared for delivery at a conference in Madrid on Thursday morning.

Yen May Weaken Further as Interest Rates Diverge - Talking Markets

The yen may weaken more in coming months on expectations that the interest-rate gap between Japan and most other countries could widen further and hurt the Japanese currency, analysts said.

Bank of Japan Gov. Kazuo Ueda said Wednesday that the central bank isn't yet confident enough to alter its super-accommodative monetary policy and argued that Japan's underlying inflation is still below the central bank's target of 2%. On the same day, Federal Reserve Chair Jerome Powell said that the U.S. central bank is likely to keep raising rates despite leaving rates unchanged earlier this month.

Chinese Balloon Used American Tech to Spy on Americans

The Chinese spy balloon that floated over the U.S. early this year was loaded with American-made equipment that helped it collect photos, videos and other information, U.S. officials said, citing preliminary findings from a closely held investigation.

Several defense and intelligence agencies, along with the Federal Bureau of Investigation, have analyzed the debris retrieved after the U.S. military detected and shot down the balloon nearly five months ago in an event that added fresh, unexpected volatility to the already fraught U.S.-China relationship.

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

(END) Dow Jones Newswires

06-29-23 0539ET