MARKET WRAPS
Stocks:
European stocks inched mostly higher on Wednesday as markets shrugged off Federal Reserve minutes saying policy makers can't be sure interest rates have peaked.
Focus turned to the U.K. autumn budget statement, where Jeremy Hunt could offer some tax cuts or other sweeteners, though analysts said he has little scope for big measures.
"Hunt will make his autumn statement today and he will do his best to try to please British voters by announcing tax cuts amid slowing inflation," Swissquote Bank said.
Shares on the Move
Thyssenkrupp's fourth-quarter performance and planned cost-cutting should be taken positively by investors, Citi said.
Adjusted EBIT was 30% ahead of the company-compiled consensus while free cash flow beat Visible Alpha consensus by about 50%, it said.
Thyssenkrupp booked a EUR1.8 billion noncash impairment for its steel business, but the launch of a cost-cutting program to save EUR2 billion is welcome, Citi added.
Economic Insight
Current market hopes of rapid and significant interest-rate cuts in 2024 are exaggerated, DZ Bank Research said.
In the eurozone, with core inflation remaining high, the European Central Bank is unlikely to initiate an interest-rate turnaround until the fourth quarter of 2024, with two rate cuts of 25 basis points each, it said.
"Monetary policy will remain at its currently restrictive level for a long time to come due to persistently high inflation, and specifically the slow decline in core inflation."
In the U.S., meanwhile, the Fed is expected to only embark on a cautious course of rate cuts in the run-up to the presidential election, DZ Bank added.
U.S. Markets:
Stock futures pointed to a mixed start as traders awaited data on jobless claims and consumer sentiment ahead of the Thanksgiving holiday.
Treasury yields were on track to fall for a fifth day, as Ten-year yields slipped, after settling Tuesday at 4.417%.
Stocks to Watch
Nvidia reported record sales, pointing to strong demand for chips that underpin artificial intelligence applications. But shares slipped premarket, in a sign of heady investor expectations for a stock that has more than tripled in 2023.
Microsoft shares were up 0.4% in premarket trading after the announcement that Sam Altman would be returning to OpenAI as chief executive.
Forex:
After rising above $1.25, sterling could build on its gains against the dollar as the market awaits the U.K. autumn budget later in the day, UniCredit Research said.
"GBP/USD might further consolidate above 1.25 ahead of the presentation of the U.K. Chancellor's Autumn Statement today, after Bank of England Governor Bailey warned against upside inflation risks from wages," UniCredit said.
Bonds:
Italian government bonds outperformed eurozone peers after the country's treasury on Tuesday cancelled some government bond auctions in the remainder of the year, leaving supply pressure limited.
The Italian treasury canceled the auction of short-term BTPs and of inflation-linked bonds on Nov. 24. Besides, it will only offer three- and seven-year BTPs at the mid-December auction but it won't sell bonds with maturity longer than 10 years, it said. It also cancelled auctions between Christmas and New Year.
G erman Bund yields have potential to fall in 2024 as interest-rate cuts will intensify in the second half of next year, DZ Bank Research said, lowering its year-end yield forecast for 2024 to 2.2% from 2.4%.
Energy:
Oil prices were broadly muted due to mixed news on the supply front and after Israel and Hamas reached a deal to release hostages and pause fighting.
OPEC is expected to continue restraining production and stabilizing oil inventories around current levels going forward, Morgan Stanley said.
Demand growth is likely to decelerate next year to around 1.2 million barrels a day on muted economic growth from around 2.2 million B/D in 2023, it said.
Non-OPEC supply is still likely to increase by 1.4 million B/D next year, enough to meet all global demand growth. "As a result, there is little room in the market for additional OPEC oil."
MS said it already assumed an extension of voluntary cuts into the first quarter, but now expects cuts to be further extended to the end of the second quarter of next year.
Metals:
Base metals prices were falling while gold ticked higher as a weaker dollar battled against uncertain industrial demand signals.
EMEA HEADLINES
A year after market turmoil, the U.K.'s chancellor is back in the spotlight
U.K. finance minister Jeremy Hunt will present his Autumn budget on Wednesday. He'll be hoping it goes a lot better than his predecessor's a little over a year ago.
In September 2022, Kwasi Kwarteng, the new Chancellor of the Exchequer - as the position is known - delivered a seasonal budget statement at the behest of freshly-installed Prime Minister Liz Truss, that proposed a GBP45 billion package of unfunded tax cuts.
Italy's Enel Plans to Boost Investments, Cut Costs as Part of 2024-26 Strategy
Enel plans to boost investments in grids and refocus its renewables strategy while boosting cash generation and cutting costs as part of its plan for the 2024-26 period.
The Rome-based energy company said it aims to focus on its regulated businesses, improving grids' resiliency and digitalization, and on higher-margin renewables investments, specifically in onshore wind, solar and battery storage.
Kingfisher Cuts Profit Expectations Again After Weaker Sales in France
Kingfisher further cut its profit guidance for fiscal 2024 after reporting an fall in third-quarter sales, mainly dragged by its performance in France.
The home-improvement retailer on Wednesday said it currently expects adjusted pretax profit-which strips out exceptional and other one-off items-to come to 560 million pounds ($702.1 million) for the year ending Jan. 31.
GLOBAL NEWS
The Fed Wants More Evidence Before Changing Rate Stance
Federal Reserve officials were unwilling to conclude they were done raising interest rates when they decided earlier this month to extend a pause in rate increases.
But minutes of their most recent policy meeting suggested they might be comfortable holding rates steady for at least the rest of the year.
A TIPS Auction Saw Its Highest Yield Since 2009, Thanks to Slowing Inflation
Tuesday's sale of 10-year Treasury inflation-protected securities was weak, a sign that traders believe inflation will continue to decelerate.
On Tuesday, investors were offered $15 billion in 10-year Treasury inflation-protected securities, or TIPS, which are U.S. government debt securities whose principal, or face value, goes up and down with the pace of inflation. The auction was awarded a 2.18% yield at the upper end, the highest yield offered at an auction on 10-year TIPS since Jan. 6, 2009.
Israel, Hamas Reach Deal to Release 50 Hostages
Israel and Hamas agreed to free 50 civilian hostages held by militants in Gaza in return for the release of Palestinian prisoners from Israeli jails and a four-day pause in fighting.
The Israeli cabinet approved the deal after a long deliberation that started Tuesday and went into the early morning hours of Wednesday in Jerusalem. It capped weeks of painstaking negotiations brokered by Qatar, Egypt and the U.S., marking the first major diplomatic breakthrough since the war began on Oct. 7. Hamas confirmed the deal in a statement.
U.S. Warns Iran Is Weighing Sending Short-Range Missiles to Russia
WASHINGTON-The U.S. fears Iran is preparing to provide Russia with advanced short-range ballistic missiles for its military campaign in Ukraine, U.S. officials said Tuesday.
Iran has already provided Russia with armed drones, guided aerial bombs and artillery shells, U.S. officials said.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
11-22-23 0537ET
