EMEA Morning Briefing : Investors Await Fresh Cues as Earnings Continue

MARKET WRAPS

Watch For:

No major economic data expected; trading updates from Barclays, Carrefour, Air Liquide, InterContinental Hotels Group, Antofagasta, Fresenius Medical Care

Opening Call:

Stock futures were lower on a weak lead from Asian markets; Treasury yields rose; U.S. dollar gained; oil futures were mixed while gold advanced.

Equities:

Stock futures were tracking lower following a quiet session on Monday with U.S. markets closed for the Presidents Day holiday.

Investors remain focused on the outlook for inflation and interest rates, as well as corporate earnings.

Minutes from the Fed's January meeting are due Wednesday. Speeches are expected this week by several central bankers, along with readings on business activity. The economic calendar is otherwise light, allowing earnings to take center stage.

A batch of key earnings by bellwether companies including Nvidia, Walmart and Home Depot this week could pull investors' focus away from concerns about stubborn inflation.

"Because the market has become concentrated, by definition, a few names can move the market with their results," said Altaf Kassam, head of investment strategy and research for Europe, the Middle East and Africa at State Street Global Advisors.

Earlier today, according to data released by the People's Bank of China the five-year loan prime rate was cut to 3.95% from 4.2% this month.

Analysts said that the deeper than expected cut indicated that China government's policy guidance to support the property sector was materializing.

Forex:

The dollar was stronger amid higher Treasury yields, which boost the appeal of U.S. fixed-income assets and demand for the greenback.

Given the U.S. holiday on Monday, market participants are waiting for fresh catalysts, Commerzbank said.

The market focus for this week is likely to be the FOMC minutes due to be released on Wednesday, it added.

Bonds:

Treasury yields were higher early Tuesday with focus on the FOMC minutes due Wednesday.

--

Some JGBs were slightly lower ahead of the 20-year auction to be held today.

Even if the 20-year JGB offering goes smoothly, the 10-year yield looks resistant to declines owing to ongoing worries that an unwinding of BOJ's negative interest rate policy will push yields higher, Mitsubishi UFJ Morgan Stanley Securities said.

The 10-year and 20-year yields are forecast to move in a 0.700%-0.750% range and a 1.500%-1.550% range, respectively, this week.

Energy:

Oil futures were mixed. WTI futures ended last week on a positive note, giving a bullish signal for this week, based on technical charts, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

WTI futures have to hold above the 200-day moving average around the $77.50/bbl-$77.60/bbl area to sustain its short-term bullish bias, the analyst said.

If they do, this could lead to a rise towards $80/bbl, he added.

Metals:

Gold edged lower early Tuesday. Trade is subdued as U.S. markets were closed Monday, ANZ Research analysts said.

Investors are looking for clues about the outlook for U.S. interest rates, and "that may come later this week when the Fed releases minutes of its last policy meeting," the analysts added.

--

Copper edged lower as Chinese investors appear to be returning from the Lunar New Year holidays in a bearish mood despite expectations of an increase in construction activity over the next few weeks as the winter lull comes to an end, ANZ Research analysts said.

However, the base metal may rise in the long run with increased investment in renewable energy infrastructure, which should boost demand enough to offset the softening in traditional industrial sectors. they said.

--

Iron ore prices were lower after China kept interest rates on its one-year policy loans unchanged, raising concerns about demand for iron ore in the near term, ANZ Research analysts said.

The only bright spot is data showing a more than 70% on-year rise in existing home sales in key Chinese cities during the Lunar New Year holiday, the analysts say, citing figures from Beike Research Institute.

However, this will have little impact on the demand for steel and iron ore, as new construction remains weak, they added.

TODAY'S TOP HEADLINES

China's Longer-Term Benchmark Lending Rate Lowered

China's longer-term benchmark lending rate was lowered this month after the central bank held its policy rates steady, according to data released by the People's Bank of China on Tuesday.

The five-year loan prime rate was cut to 3.95% from 4.2%, said the PBOC. The five-year LPR was last lowered in May 2023.

Data Show the Economy Is Booming. Wall Street Thinks Otherwise.

Data suggesting the U.S. economy is too hot for comfort are getting a cool reception in some corners of Wall Street.

A handful of high-profile economic reports, covering the big topics of inflation, economic growth and the labor market, have leaned decidedly on the too-warm side. But many economists have minimized these surprises, pointing to other data that are less alarming and measurement challenges that are unique to the start of the year.

Megaprojects in the Desert Sap Saudi Arabia's Cash

Saudi Arabia has been a conveyor belt of flashy spending plans over the past year: a $48 billion property development anchored by a quarter-mile-tall cube; a global airline to rival aviation giants; a merger with the PGA Tour; a $100 billion investment in chips and electronics.

It is all getting rather expensive.

Are Lithium Stocks at Rock Bottom?

If investing is about pouncing at the point of maximum pessimism, lithium stocks must be worth a fresh look.

The metal used to make electric-vehicle batteries has given investors whiplash. Prices rose rapidly in 2021 and 2022 before falling even faster in 2023. Seaborne spot supplies of the benchmark compounds, lithium carbonate and lithium hydroxide, now cost roughly what they did in mid-2021, according to data from the price-reporting agency Fastmarkets.

The Secret Oil-Trading Ring That Funds Russia's War

In the early days of the Ukraine war, data trickled out showing that a mysterious firm called Nord Axis had become one of the biggest global traders of Russian oil.

The company seemed to have sprung from nowhere. It had been incorporated in Hong Kong nine days before Russia's invasion. A man from Belize who was a nominee director said later that year that he didn't know why Nord Axis had been founded or who its owners were.

JD.com May Bid for This Retailer. Why the E-Commerce Group Shopped Outside China.

JD.com, the e-commerce group weathering a storm of tighter Chinese regulation and slowing consumer demand, has gone shopping abroad in an attempt to diversify.

The Beijing-based marketplace-it sells everything from electronics and clothing to furniture and fresh food-said Monday it is considering an offer for Currys, an electronic goods retailer based in the U.K. that has 823 stores and employs around 28,000 workers.

BHP Pares Midyear Payout After Net Profit Fall, Flat Earnings

BHP Group dialed back its dividend on Tuesday as the world's biggest miner reported a steep fall in first-half net profit and flat underlying earnings.

Chief Executive Mike Henry said BHP has faced volatility in global commodity prices and demand in the developed world that has been softer than expected, even as appetite from buyers in China and India has been relatively strong.

Capital One Is Buying Discover Financial

Capital One said it will buy Discover Financial Services for more than $35 billion, a deal that will marry two of the largest credit-card companies in the U.S.

Under the terms of the all-stock deal, Discover shareholders are set to receive 1.0192 Capital One shares for each Discover share, representing a premium of about 27% based on Discover's closing price Friday. After the deal closes, Capital One shareholders will hold roughly 60% of the combined company, with Discover shareholders owning the rest.

Home Depot's Sales Are Expected to Fall. Here's Where the Upside Could Be.

Investors are bracing themselves for what seems to be inevitable: Home Depot could post its first annual sales drop since 2009.

The company all but confirmed as much in its fiscal-third-quarter earnings report in November. Since then, Wall Street has lowered its sales estimates for the home improvement retailer, which reports earnings Tuesday morning.

Walmart Is Poised for Another Strong Quarter. Why Its Outlook Could Overshadow Results.

Walmart's recent earnings record has been close to unimpeachable. For the past six quarters, the company has met or surpassed Wall Street's expectations. Analysts believe Walmart is poised for another beat when it reports earnings Tuesday morning.

But with investors champing at the bit for any indications on what the world's largest retailer is forecasting for 2024, a strong quarter is likely to be overshadowed by the company's guidance.

Write to [e-mail]

Expected Major Events for Tuesday

05:30/NED: Feb Consumer confidence survey

06:00/FIN: Jan Labour force survey, incl unemployment

07:00/SWE: 4Q Industrial inventories

07:00/EU: Jan New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)

07:00/SWI: Jan Trade Balance

07:00/SWE: 4Q Industrial capacity utilization

07:00/DEN: 4Q Preliminary GDP

09:00/EU: Dec Euro area balance of payments

09:00/POL: Jan Average gross wages

09:00/POL: Jan PPI

09:00/POL: Jan Industrial Production Index

10:00/ITA: Dec Balance of Payments

10:00/EU: Dec Construction output

10:00/BEL: Feb Consumer Confidence Survey

10:00/LUX: Jan Unemployment

11:00/UK: Jan Aluminium Production report

15:59/GRE: Dec Balance of Payments

17:59/POR: Dec Balance of Payments

17:59/POR: Nov ICSG Copper Report

All times in GMT. Powered by Onclusive and Dow Jones.

Write to us at [e-mail]

(MORE TO FOLLOW) Dow Jones Newswires

02-20-24 0015ET