MARKET WRAPS

Stocks:

European stocks struggled for momentum on Monday as investors digested mixed Chinese data and awaited a busy week for central bank decisions, including a Bank of England announcement.

China's consumption expanded at a faster pace in May as Beijing moved to boost domestic demand, while investment was weighed by sluggishness in the property sector.

According to Scope Markets, early gains faded in Europe, with French political uncertainty adding to a somewhat shaky environment for stocks globally.

French Banks/Assets

French banks' earnings and CET1 ratios are unlikely to be impacted in a major way by the increase in bond spreads so far, KBW said, after French assets fell sharply last week following Macron's call for a surprise snap parliamentary vote.

The pullback in French bank stocks seems exaggerated and provides a buying opportunity, Jefferies said, comparing their reaction to France's surprise parliamentary vote with that of Italy's 2022 elections.

UBS Global Wealth Management said the upcoming French elections present a complex landscape with significant implications for various asset classes , but investors should try and keep a long-term focus.

U.S. Markets:

Stock futures suggested a mostly lower start for Wall Street after the Nasdaq Composite closed at a fresh high on Friday. Treasury yields edged higher.

Stocks to Watch

Autodesk was up 3.3% after WSJ reported that Starboard Value has a roughly $500 million stake in the design-software maker and is pushing for changes.

Broadcom advanced 2.5% premarket, on pace to rise for a seventh session. Last week, Broadcom said it planned to execute a 10-for-1 stock split.

Forex:

Pressure on the euro is likely to continue in the coming weeks as its near-term prospects will depend on the final outcome of the French election on July 7, UniCredit Research said.

If Macron maintains a majority, this will likely lift the euro, potentially above $1.09. However, the euro will extend its retreat, potentially to below $1.05, if there is a hung parliament--with no political group winning a majority--and especially if National Rally wins a majority, it said.

There is room for U.S. interest-rate expectations to adjust higher which should help strengthen the dollar, Brown Brothers Harriman said.

Markets continue to price in about 50 basis points of Federal Reserve interest-rate cuts by the end of 2024, even as the Fed forecasts only one rate cut this year, it said.

Neel Kashkari told CBS News on Sunday that it was a "reasonable prediction" that the Federal Reserve will wait until December to cut interest rates.

Bonds:

The European Central Bank is in no hurry to cut interest rates and this could delay a steepening of eurozone government bond yield curves, LBBW said.

"We believe that the ECB's reserved stance on further monetary easing represents a considerable obstacle to a cyclical steepening trend getting off the ground."

At the June 6 meeting, the ECB damped hopes of further swift interest-rate cuts, through higher inflation projections and predominantly hawkish comments in the aftermath, it said.

The Federal Reserve's "higher-for-longer" stance on interest rates is indirectly also becoming a stumbling block for a steepening of eurozone bond yield curves, LBBW added.

Eurozone bond market focus will firmly remain on the dynamics of French government bond yield spreads, Commerzbank Research said.

"Several sessions of stabilization seem needed to calm nerves, but there is still no quick fix in sight."

OATs remain vulnerable, while data is likely to take a backseat, Commerzbank added.

Energy:

Oil prices were broadly stable as traders digested mixed data from top consumer China.

China's retail sales--a key metric of consumer spending--rose 3.7% from a year earlier in May, while industrial output expanded 5.6% against expectations of 5.9% growth.

According to a Reuters report, the latest data also showed that China boosted crude oil stockpiles in the first five months of the year, while oil imports declined--a bearish signal for the demand outlook.

Brent oil futures are now tracking between $80--$85/barrel and are likely to stick around that range during 2H 2024, with supplies from OPEC+ expected to offset any shifts in global oil-demand growth, Commonwealth Bank of Australia said.

Metals:

Base metals prices and gold futures fell as the dollar rose with investors weighing up the likelihood of fewer U.S. interest-rate cuts, given hawkish Fed commentary.

Saxo Bank said gold's shallow correction to date suggests investors are actively buying dips in prices, despite a pause in gold purchases from China's central bank.

"Support around $2,275 [is] still a major line in the sand, and one that continues to attract buy-on-dip activity," Saxo Bank said.

It reckons the long-term bullish outlook for gold hasn't changed and expects the PBOC to resume purchasing metal at some point.

Clear signs of improving copper demand will likely be needed for mining stocks to regain their luster, Jefferies said, adding there's been evidence of a slowdown in demand, with inventories on the Shanghai Exchange at the highest level since early 2020.

That is weighing on market sentiment, which had been extremely bullish and propelled copper futures to all-time highs.


EMEA HEADLINES

Sampo to Buy Topdanmark in $4.73 Billion All-Share Deal

Nordic insurance company Sampo is buying the shares of Topdanmark that it doesn't already own in a deal that values the Danish insurance company at 33 billion Danish krone, or about $4.73 billion, consolidating its position within the property and casualty insurance market.

Under the deal accepting shareholders will get 1.25 Sampo A shares for each Topdanmark share held, the companies said on Monday. The offer values each Topdanmark share at 366.38 Danish krone and is a 27% premium to the company's closing share price of 289.60 krone on Friday.


UBS Sets Aside $900 Million for Credit Suisse Funds Linked to Greensill

UBS Group said it expects to book a provision of around $900 million on a buyout offer to investors in former Credit Suisse funds linked to now-defunct specialist lender Greensill Capital.

This marks the latest step by the Swiss financial group to move on from issues that hindered its once rival and led to its takeover in a deal engineered by Swiss authorities and completed a year ago.


ING Groep to Grow Mid-Term Income, Return on Equity

ING Groep expects to grow its income and for its return on equity to rise in the mid-term, the Dutch lender said as it laid out its financial targets to 2027.

The bank guided for a return on equity-a profitability measure calculated by dividing a company's net income by its shareholders' equity-of 14% for the period, beating analyst expectations of 13.6% taken from a company-compiled consensus. This is above its previous target to reach a return of 12% by 2025.


GLOBAL NEWS

China Launches Antidumping Probe Into EU Pork Imports

Beijing has launched an antidumping probe into pork imports from the European Union, in possible retaliation against the EU's recent tariff moves, as trade tensions mount between China and the 27-member bloc.

The trade investigation into imported pork products that include offal from the EU will start Monday, China's commerce ministry said in a statement Monday. The probe could run for a year and could be extended for another six months, the ministry added.


French stocks have struggled since Macron called for election. Goldman Sachs says it can get worse.

A scenario where the far-right National Rally wins an absolute majority in French parliament could lead to further underperformance for French stocks after its worst week in two years, say strategists at Goldman Sachs.

The CAC 40 FR:PX1 last week fell over 6% after French President Emmanuel Macron called for a parliamentary election, though the index advanced on Monday. French stocks are now worth less than their U.K. counterparts, at $3.17 trillion versus $3.23 trillion, according to FactSet data through Friday.


The Economy Is Increasingly Disjointed. That's Better News Than It Sounds.

Right now, the U.S. economy is a decidedly mixed bag. For investors, that could be good news.

It can be hard to know what to make of the U.S. economy. Inflation remains steadily high. A number of recession indicators, like an inverted yield curve and weak consumer confidence, suggest a recession could be looming ahead. On the other hand, GDP growth and corporate profits remain solid.


Russia Sets Hearing as It Moves Toward Trial of Falsely Accused WSJ Reporter Evan Gershkovich

A Russian court said judicial proceedings in the case of Evan Gershkovich, the Wall Street Journal reporter held in Russia for over a year, would be held in secret, with the first hearing in a regional court beginning on June 26, the country's state media reported.

The 32-year-old journalist, a U.S. citizen who was accredited to work in Russia, was falsely accused of espionage in an indictment approved by prosecutors last week. Gershkovich was detained by Russia's Federal Security Service while on a reporting trip for the Journal in March last year.


Corporate Tax Rate Spurs Political Fight With More Than $1 Trillion at Stake

WASHINGTON-The 21% U.S. corporate tax rate is the biggest single variable in the sprawling 2025 tax debate, and the two parties are trying to turn that dial in opposite directions with major consequences for companies' profits and federal revenue.

The rate could climb as high as 28% if Democrats sweep November's elections and move as low as 15% if Republicans gain full power.


Israel to Pause Fighting Along Southern Route in Gaza to Ease Aid Blockage

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06-17-24 0600ET