MARKET WRAPS
Stocks:
European equities made solid gains on Wednesday as concerns about a U.S. recession eased somewhat following a string of strong economic data.
"The upbeat reaction to the economic data [on Tuesday] enabled tech stocks to resume their relentless march this year," Interactive Investor said. Software firm Sage Group was the FTSE 100's biggest riser, up 4.2%.
Meanwhile, investors are awaiting comments from four of the most important global central bank chiefs, with Jerome Powell, Christine Lagarde, Andrew Bailey and Kazuo Ueda all due to speak at the Sintra forum.
Stocks to Watch
ABB is expected to post double-digit organic revenue growth in the second-quarter but below that seen in the first quarter, Jefferies said. It raised its Ebita estimates by 13% for 2023 and by 14% for 2024, modeling second quarter orders at 1%, revenue at 1% and Ebita at 2% ahead of consensus. Read more.
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Siemens Energy faces a high level of uncertainty associated with its wind-turbine unit and potential provision charges, UBS said, downgrading the stock to neutral from buy with a price target of EUR16. Read more.
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Volkswagen is reportedly curbing production of some battery-electric vehicle models at its plant in Emden, Germany, suggesting lower demand and the possibility of Europe-wide implications, Morgan Stanley said. Read more.
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Zalando is stuck with an antiquated business model and won't meet its long-term growth targets as the online fight will pressure margins with higher marketing and fulfillment costs, Bernstein said. Read more.
Market Insight
The second half of 2023 should deliver a continuation of the tightening journey for most developed market central banks, at least over the summer, although differentiation across jurisdictions will emerge as the end of the cycle draws closer, JPMorgan said.
"We see the Fed and the European Central Bank closer to the end of their tightening cycle than the Bank of England and Scandinavian central banks, with risks broadly tilted toward higher peak in policy rates, while Antipodean central banks are expected to stay on hold," it said.
Resilient growth and persistent inflation will rule out an imminent recession, according to JPM's baseline scenario.
Read Riksbank Seen Raising Policy Rate 25Bps to 3.75% on Thursday
U.S. Markets: Markets:
Stock futures pointed lower with tech shares leading the declines after a report from The Wall Street Journal said the Biden administration was considering new curbs on exports of artificial intelligence chips to China.
The yield on the benchmark 10-year Treasury note declined to 3.752%, from 3.767% on Tuesday, while the ICE Dollar Index edged up 0.1%.
Stocks to Watch
Nvidia declined 4.2% in premarket trading and Advanced Micro Devices fell 3.5% following the WSJ report. Read more.
Drone maker AeroVironment reported fiscal fourth-quarter revenue that beat analysts' expectations. Its stock rose 5.2%.
Ahead
Economic updates set for release on Wednesday include advanced retail and wholesale inventories for May. General Mills is scheduled to report fiscal fourth-quarter earnings before the stock market opens .
Follow WSJ markets coverage here .
Forex:
The euro could rise if upcoming eurozone inflation data support the ECB's restrictive policy approach, Commerzbank said. It added that the currency has further upside potential if the data, due on Friday, exceed expectations.
"As the market believes in the ECB's determination when it comes to fighting inflation, high inflation rates would suggest the ECB might do more."
Commerzbank expects EUR/USD to trade at 1.10 by the end of the quarter.
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The dollar edged higher, building on Tuesday's gains after some strong U.S. economic data.
The data "show resilience in the near-term to the negative impact of higher rates and tightening credit conditions," and should allow the Federal Reserve to continue raising interest rates, MUFG said.
"It is the strongest run of positive U.S. economic data surprises since early April which keeps the Fed on track to deliver at least one of their planned two further hikes in July," MUFG said.
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Sterling is likely to weaken in the second half of the year as the recent steep rise in interest rates takes a toll on the economy, Natixis said.
"The continued rise in key rates will only exacerbate the deterioration in economic activity, and in particular in the real estate market," Natixis said.
It also sees a risk the BOE won't raise rates as much as the market expects, weighing on sterling further. It expects EUR/GBP to rise to 0.88 by year-end, from 0.8597 currently.
Bonds:
Bond returns in the first half of the year have been positive across developed markets, with the exception of the U.K., and are likely to remain positive in the second half of the year, too, J.P.Morgan said.
"Looking ahead, we still project positive bond returns across [developed markets] as the expected end of the tightening cycle should drive an outperformance of the intermediate sector, especially in our baseline scenario of slowdown or recession in 2024 opening the door for some reversal of monetary policy," JPM said.
The positive performance of the first year-half concentrated in the first quarter JPM said, adding that Treasurys have underperformed eurozone bonds over the second quarter.
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Natixis sees stability ahead in long-term euro rates but a rally in dollar rates, and expects the 10-year Bund yield to end the year broadly around current levels.
"The Bund is expected to remain slightly stable overall," Natixis said, targeting the 10-year yield at 2.35% in December 2023. It added that the rally should be more substantial on the 10-year Treasury, expecting the yield at 3.40% in December.
Energy:
Oil futures were little changed following Tuesday's steep losses, after some strong U.S. economic data heightened the likelihood of more rate hikes from the Fed, according to some analysts.
Read Eni's Congo Divestment to Have Marginal Effect on Production
Metals:
Copper prices weakened slightly after a sharp drop in China's industrial profits added to worries about the nation's economy.
Profits at China's industrial companies fell 12.6% year on year in May, following a 18.2% drop in April. China's industrial profits have declined almost 19% between January and May.
While the data is weighing on base metals prices, low inventories are easing the declines.Copper inventories on the LME are down 22% so far this month.
DOW JONES NEWSPLUS
EMEA HEADLINES
German Consumer Sentiment to Weaken in July on Gloomier Outlook
Consumer confidence in Germany worsened for the first time in nine months in July, reflecting a more uncertain climate for household spending, as the country's economic outlook continues to be bleak after a recession in the winter.
Germany's forward-looking consumer sentiment index forecasts confidence to tick down to minus 25.4 in July-the first decline since October 2022-from a revised minus 24.4 in June, according to data from market-research group GfK published Wednesday.
Rio Tinto Building Australian Battery Lab to Test Minerals
Rio Tinto, the world's second-biggest miner by market value, is building a battery lab in Australia where it can test how the commodities it produces work in the likes of electric-vehicle batteries, said the company's minerals chief, Sinead Kaufman.
In prepared remarks for an industry forum on Wednesday, Kaufman said Rio Tinto's battery lab in Melbourne is expected to be operational by November and is intended to improve the miner's understanding of battery production, manufacturing and chemistry.
DSM-Firmenich Sees Lower Adjusted Ebitda in 2023 on Weak Vitamin Market
DSM-Firmenich on Wednesday said it doesn't expect a material improvement in business conditions in the second half of 2023 after seeing a further weakening of the vitamins market in the second quarter.
The Dutch nutrition, health and beauty company guided for a proforma adjusted earnings before interest, taxes, depreciation and amortization for 2023 of between 1.8 billion and 1.9 billion euros ($1.97 billion-$2.08 billion) as vitamin prices are expected to remain low until the end of the year, compared with the EUR2.275 billion it posted the previous year. The guided range includes a negative vitamin effect of around EUR400 million and a negative foreign exchange effect of about EUR100 million, it said, noting high vitamin inventories produced at elevated costs are delaying the expected positive impact from lower input costs in the second half.
Volvo Signs Deal Giving Its Electric Cars Access to Tesla Charging Network
Volvo Car said late Tuesday that it has signed an agreement that gives drivers of its electric cars access to Tesla's network of 12,000 superchargers across the U.S., Canada and Mexico.
The deal will see Volvo equip its new cars with a North American Charging Standard port from 2025, with current electric-car drivers able to access the Tesla network from the first half of 2024 with an adaptor.
UBS reportedly cutting half of Credit Suisse workforce after merger
UBS AG is preparing to cut more than half of Credit Suisse's workforce and about 35,000 jobs, or 30%, of the combined staff of the two banks next month now that the merger deal has closed, according to a Bloomberg report Tuesday, citing people familiar with the bank.
Credit Suisse employs about 45,000 staff and the combined banking group employed about 120,000 when the merger deal closed.
Swiss Life on Track to Achieve or Exceed 2024 Financial Targets
Swiss Life Holding said Wednesday that it is on track to either meet or exceed its 2024 financial targets.
The Swiss insurer set out its 2024 targets in late 2021, including a dividend payout ratio of more than 60%, an adjusted return on equity of 10% to 12%, and a fee result of 850 million to 900 million Swiss francs ($951 million-$1.01 billion).
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06-28-23 0534ET
