EMEA Morning Briefing : Markets in Wait-and-See Mode Ahead of U.S. Jobs Data

MARKET WRAPS

Watch For:

EU GDP; Germany industrial production index, foreign trade; no major corporate events expected

Opening Call:

Shares may be little changed in Europe on Friday. In Asia, stock benchmarks were mostly lower; Treasury yields gained; the dollar edged lower; while oil and gold advanced.

Equities:

European stocks may tread water in early trade as markets await the U.S. jobs data for fresh clues about the strength of the U.S. economy.

The European Central Bank on Thursday cut interest rates for the first time in nearly five years, taking the bank's deposit rate from a record 4% to 3.75%. The widely expected move sent only a gentle ripple through financial markets in Europe and the U.S.

"Investors are in a wait-and-see mode," said Venkat Balakrishnan, head of asset allocation at MissionSquare Retirement. "They want to understand the job and wage trends to assess the impact on inflation and rates."

Forex:

The U.S. dollar weakened slightly ahead of the U.S. nonfarm payrolls report due out later today.

The U.S. labor market appears to be in strong shape despite some signs of loosening, said Joseph Capurso, head of international and sustainable economics at CBA.

The nonfarm payrolls report is likely to be one of strength, albeit ebbing, Capurso said. Hence, market pricing for the Fed's first rate cut in September may be pushed out, supporting a modest strengthening of USD, Capurso added.

Bonds:

Yields on U.S. government debt ended at the lowest levels in more than two months on Thursday after jobless claims climbed to a four-week high.

The next major labor-market update is the nonfarm-payrolls report for May, which will be released on Friday. Economists polled by the Wall Street Journal expect 190,000 job gains versus 175,000 in April.

"The bond market will remain data dependent just like the ECB, leading to opportunity for investors who actively invest in the bond market," Franklin Templeton said.

Energy:

Oil futures gained as worries about the outlook for U.S. economic growth faded, although concerns remain about fuel demand as the summer travel season gets underway.

Demand metrics are under particular scrutiny after the OPEC+, agreed Sunday to begin slowly unwinding 2.2 million barrels a day in voluntary production cuts beginning in the fourth quarter of this year.

"The stabilization in oil should be considered fragile, however, as the oil market does not like sources of uncertainty like OPEC+ delivered with last weekend's production policy decision," analysts at Sevens Report Research said in a note.

Metals:

Gold rose in Asia, supported by global rate-cut prospects driven by the ECB and the Bank of Canada lowering rates this week, which would enhance the appeal of the non-interest-bearing precious metal.

Market focus is on the U.S. nonfarm payroll data, SP Angel analysts said. Gold prices are underpinned by market expectations of a stronger probability of a Fed rate cut in September, a sentiment reinforced by a softening labor market, said Quasar Elizundia, research strategist at Pepperstone.

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Copper edged lower after gaining overnight. The prospect of easing monetary policy boosts sentiment across the commodity market after the European Central Bank cut interest rates by 25 basis points, ANZ Research analysts said.

However, they note that the red metal's recent surge could be overdone as the record high prices aren't justified by the real-world supply and demand, citing global commodity trader Trafigura.

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Iron ore prices were higher amid speculation of China steel production cuts. Chinese regulators will hold a meeting on Friday to discuss plans for cutting steel output, ANZ analysts cited sources as saying.

TODAY'S TOP HEADLINES

China Exports Grew at Faster Rate in May

China's exports grew at a faster rate in May, thanks to resilient global demand, while import growth slowed.

Outbound shipments rose 7.6% from a year earlier in May, up from a 1.5% on-year increase in April, the General Administration of Customs said Friday.

Meet the 'Degen' Traders Fueling the Latest Meme-Stock Mania

Degenerates are swarming the stock market.

A risky style of trading is roaring back in popularity, driven by amateur traders who call themselves "degens" and pile into long-shot trades that proudly have nothing to do with conventional ways of assessing investments. Some are flinging cash at specific stocks or cryptocurrencies just to be part of a movement. Others are sticking around for the jokes and memes.

Saudi Arabia Set to Raise Over $11.2 Billion From Aramco Stock Offering

Saudi Arabia is set to raise more than $11.2 billion after pricing its offering of Aramco stock toward the lower end of the targeted range.

The kingdom-which currently owns more than 82% of Saudi Arabian Oil, also known as Aramco-said last week it plans to sell 1.545 billion shares in what is its crown jewel and the world's most valuable oil company. That represents a small fraction of its total holding, but is a crucial element in the country's effort to finance its plans to diversify the economy beyond oil.

British Entrepreneur Mike Lynch Acquitted in HP Case

British tech entrepreneur Mike Lynch was acquitted Thursday of criminal charges that he fraudulently inflated revenues at his company Autonomy before selling it to Hewlett-Packard for more than $11 billion in 2011.

Lynch's acquittal on all charges, including conspiracy and wire fraud, brings the curtain down on a near 13-year saga that began with a deal that has since been described as one of the worst in Silicon Valley history.

Chanel Creative Director to Leave in Latest Fashion Shake-Up

PARIS-Chanel said creative director Virginie Viard would leave the luxury brand, marking the departure of one of the few women to lead the artistic direction of a major fashion house.

The French label, known for its tweed jackets, No. 5 fragrance and classic flap handbags, said late Wednesday that Viard would depart after almost 30 years at the company, the last five at its creative helm.

The American Company Trying to Keep Ukraine's Nuclear Reactors Online

RIVNE, Ukraine-After Russia's full-scale military invasion, Ukraine abruptly stopped buying nuclear fuel from Moscow, its top supplier in an industry that accounted for more than half of the country's electricity generation.

Now, a storied name in American industry is stepping in to keep reactors running, and offering other countries reliant on Soviet-designed power plants an alternative supplier.

Netflix Shareholders Vote to Recommend Refreshed Executive-Pay Plan

Netflix shareholders voted to recommend approval of a refreshed executive-pay plan a year after the company's previous proposal was rejected.

The streaming company said Thursday that shareholders had voted for advisory approval of the new plan, which gives both chief executives total target pay of up to $40 million each. The outcome of the vote is nonbinding.

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Expected Major Events for Friday

04:30/NED: Apr Consumer Spending

06:00/GER: Apr Foreign Trade

06:00/DEN: Apr Industrial production & new orders

06:00/NOR: Apr Industrial Production Index

06:00/UK: May Halifax House Price Index

06:00/GER: Apr Industrial Production Index

06:00/ROM: 1Q GDP

06:30/HUN: Apr Preliminary Industrial Production

06:45/FRA: Apr Foreign trade

06:45/FRA: Apr Balance of payments

07:00/SWI: May SNB foreign currency reserves

07:00/AUT: Mar Foreign Trade

07:00/SVK: Apr Foreign trade

08:00/BUL: 1Q GDP - preliminary data

08:30/UK: 1Q Bank of England external business statistics

09:00/GRE: 1Q Provisional GDP

09:00/GRE: Apr External Trade (provisional data)

09:00/EU: 1Q GDP and Main Aggregates Estimate

09:00/EU: 1Q Employment

09:00/LUX: 1Q GDP

09:00/CRO: Apr Foreign Trade

10:00/IRL: May Monthly Unemployment

10:00/POR: Apr International trade statistics

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

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

(END) Dow Jones Newswires

06-07-24 0014ET