European Midday Briefing : Stocks Slip Again on Mixed Earnings

MARKET WRAPS

Stocks:

European stocks traded lower again on Wednesday following some mixed corporate news.

"The U.K.'s flagship index was not helped by a lukewarm reaction to results from some of its heavy hitters," AJ Bell said.

Reckitt Benckiser was among the biggest FTSE 100 fallers , down 5% after it reported worse-than-expected third-quarter like-for-like sales.

Meanwhile, Deutsche Bank's shares rose almost 7% after it reported that higher interest rates had benefited its lending business .

U.S. Markets:

Stock futures were down, led lower by tech shares following mixed earnings from Microsoft and Google parent Alphabet.

Yields in benchmark 10-year Treasury notes inched up, but held below the 16-year high of 5% reached Monday.

Stocks to Watch

Alphabet fell 6.7% in premarket trading, echoing an after-hours slide the previous evening, after the tech giant reporting disappointing sales growth in its cloud business.

Microsoft reported better-than-expected revenue growth for the latest quarter, amid strengthening demand for its cloud-computing services. The stock rose almost 4% in premarket trading.

Forex:

A macro backdrop of recession doesn't mean EUR/USD is heading lower, MUFG said.

"A level of 1.0500 for EUR/USD in large part we believe captures the current divergence between the euro-zone and the U.S."

The purchasing managers indices from the U.S were the complete contrast of the PMIs in the eurozone, it said, adding that all three PMIs in the U.S. were stronger than expected.

MUFG said that at around 1.0600, there is still a case to argue euro resilience.

The dollar is more likely to rise than fall, supported by the strong data on U.S. economy, ING said.

"With markets having seen a modest reaction to geopolitical risk and high U.S. yields making the dollar an expensive sell, a recovery in DXY to the 107.00 highs looks more likely than another material correction for now."

Bonds:

Eurozone government bond yields pared the bulk of earlier gains after the German Ifo index came in at 86.9 for October , better than the 85.9 expected by analysts in The Wall Street Journal's poll.

German Bunds look stuck in their recent range as the rally stalled at key levels and data should support a more cautious tone from the ECB on Thursday, Commerzbank Research said.

"Larger positioning adjustments ahead of tomorrow's ECB meeting seem unlikely after the latest rally stalled at 2.8% for 10-year Bund yields and 4.8% for 10-year U.S. Treasury yields."

Wednesday's rather light data calendar, including the German Ifo index, is unlikely to give the market a new direction, Commerzbank said.

Energy:

Oil prices continued to fall, amid worries that the wider Middle Eastern region could become embroiled in the current conflict in Israel.

"Although there was no further escalation in the Israel-Hamas conflict yesterday, the market remains on edge and the focus continues to be on any further developments within the region," ING said, adding that markets should remain volatile due to the conflict.

The need for energy in developing and emerging markets-- particularly in Asia--will push fossil-fuel demand to new highs in 2024 despite efforts to cut emissions, the Economist Intelligence Unit said.

Fossil fuels will dominate despite high demand for renewables, with new peaks in oil, coal and gas, it said.

Metals:

Base metals prices were mixed, while gold edged lower in early trading, with worries over demand keeping prices range-bound.

Sucden Financial noted that Chinese support for the economy has stepped up, after the government issued additional sovereign debt and raised the budget deficit ratio.

"We expect that while these announcements are not game changers for the market, the cumulative impact of policy support, especially in the form of housing market aid, will help stabilize the demand for steel in Q4 2023 before a slight recovery next year."

EMEA HEADLINES

Heineken Backs 2023 Views Despite Seeing Weakening Consumer Demand

Heineken backed its full-year guidance after third-quarter revenue slightly missed market expectations, as the group focus on improving business performance amid a slowing consumer demand.

The Dutch brewer said adjusted net revenue before exceptional items and amortization-one of its preferred metrics-rose to 8.015 billion euros ($8.49 billion) in the quarter from EUR7.79 billion last year.

Kering Sales Miss Forecasts Amid Luxury Industry Slowdown

Kering posted sales below analysts' expectations for the third quarter, becoming the latest fashion group to reel from a slowdown in the luxury-goods industry as the postpandemic boom fades.

The owner of Gucci and Yves Saint Laurent on Tuesday reported revenue of EUR4.46 billion ($4.76 billion) in the three months to the end of September, down 13% in reported terms and 9% on a comparable scope and exchange-rate basis. Analysts had forecast sales of EUR4.52 billion, according to FactSet.

Dassault Systemes Raises EPS Outlook on 3Q Rise in Sales, Operating Margin

Dassault Systemes on Wednesday confirmed its full-year guidance and raised its earnings-per-share outlook following a rise in revenue and an operating margin that was slightly higher than expected.

Reporting on a non-IFRS basis, the French software maker said overall revenue rose 11% from the third quarter of last year to 1.42 billion euros ($1.50 billion). Dassault Systemes had expected third-quarter revenue of between EUR1.40 billion and EUR1.42 billion.

Lloyds Banking Backs 2023 Guidance on Higher Third-Quarter Pretax Profit

Lloyds Banking Group backed its 2023 guidance as it posted a better-than-expected rise in pretax profit for the third quarter.

The British bank reported a pretax profit for the three months to Sept. 30 of 1.86 billion pounds ($2.26 billion) compared with a restated GBP576 million for the same period a year earlier and with GBP1.82 billion expected by a company-compiled consensus.

GLOBAL NEWS

What Can the Fed Do About the Deficit? Nothing

Federal Reserve officials say soaring long-term bond yields are a key factor in the economic outlook and their interest-rate decisions. They also say the swelling federal deficit is one reason yields are rising.

What they won't say is that political leaders should therefore do something about the deficit.

Why the Shine Has Come Off Clean-Energy Stocks

Clean-energy stocks have fallen out of favor, with pressures created by rising interest rates outweighing supportive government policies.

The iShares Global Clean Energy ETF reached its lowest level since July 2020 this week. The exchange-traded fund invests in renewable-energy companies and utilities in line with a benchmark compiled by S&P Dow Jones Indices, including First Solar and Plug Power. It has plunged 33% this year.

Hong Kong Cuts Housing, Stock-Market Taxes in Bid to Boost Global Standing

Hong Kong will cut taxes on home purchases and stock trades, part of efforts to revive its credentials as a financial hub and boost a struggling property market.

Hong Kong Chief Executive John Lee on Wednesday unveiled a raft of measures to turn around flagging property sales. These include halving home-purchase taxes and allowing homeowners to sell without paying extra tax after holding properties for two years, down from three years previously.

Gaza Aid Efforts Near Collapse, Hospitals Close as Israeli Airstrikes Intensify

The largest provider of humanitarian support in the Gaza Strip said it would be forced to cease operations in the enclave by Wednesday night if it doesn't receive fuel, putting desperately needed aid for the strip at risk amid intensifying Israeli airstrikes.

The United Nations Relief and Works Agency said that without the additional fuel it would be unable to pick up and distribute any incoming aid that enters Gaza, affecting residents across the enclave, including the 600,000 people sheltering at its facilities.

Iranian-Backed Militias Mount New Wave of Attacks as U.S. Supports Israel

U.S. Secretary of State Antony Blinken warned Tuesday that Washington would react "swiftly and decisively" if Iran or its proxy forces attack U.S. personnel after Tehran raised the risk of a larger Middle East conflict in recent days by unleashing the regional militias it has spent years arming.

For more than six months, these Iranian-backed militia groups refrained from launching drones or rockets against American troops in Iraq and Syria, as part of what appeared to be an undeclared truce between Tehran and Washington.

GOP Picks Mike Johnson as House Speaker Nominee After Tom Emmer Stumbles

WASHINGTON-Rep. Mike Johnson of Louisiana was chosen as House Republicans' latest nominee for speaker in a conference vote late Tuesday, hours after the party elected and then derailed a different member in its search for the elusive candidate who can actually win the gavel.

At the end of a marathon day of internal debate and votes, Johnson, the vice chairman of the House Republican conference, bested Byron Donalds of Florida, a Trump ally popular with many of the House's most conservative lawmakers. In a shift, lawmakers left the Capitol on Tuesday night optimistic that Johnson could unite them after a series of failed attempts to find a successor to former House Speaker Kevin McCarthy (R., Calif.), who was ousted three weeks ago.

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

(END) Dow Jones Newswires

10-25-23 0643ET