EMEA Morning Briefing : Shares Poised for Mild Gains Ahead of European Manufacturing PMI

MARKET WRAPS

Watch For:

Manufacturing PMI data for eurozone, Germany, France, Italy, UK; unemployment data for EU, Italy; UK nationwide house price index; OECD regional outlook report; no major corporate updates expected

Opening Call:

Shares are set to post mild gains in Europe on Monday after the U.S. Congress averted a government shutdown. In Asia, stock benchmarks mostly rose; Treasury yields advanced; the dollar slightly strengthened; while oil gained amid supply concerns and gold inched lower.

Equities:

European stocks are poised to head slightly higher Monday, as the threat of a U.S. government shutdown over the weekend passed, after the House and Senate approved a stopgap spending bill that President Joe Biden signed to avert the crisis.

Investors are looking forward to Monday's raft of European manufacturing PMI figures, as well as a week of U.S. labor market data.

A number of U.S. economic reports are due, including the job openings and labor turnover survey on Tuesday, the ADP private payrolls report on Wednesday, the latest unemployment claims numbers on Thursday, and the jobs report for September on Friday.

Investors have been "swinging back and forth" on whether the U.S. economy is in for a recession or a "soft landing" engineered at least in part by Federal Reserve interest-rate hikes to battle inflation, said Northwestern Mutual Wealth Management Co.

Forex:

The dollar nudged higher in Asia amid higher Treasury yields, which increased the allure of U.S. fixed-income assets and demand for the greenback.

Positive sentiment resulting from the U.S. government averting a shutdown is driving U.S. yields higher, given that a shutdown would have had some negative impact on growth, said RBC Capital Markets.

Prevailing market trends--higher yields, stronger dollar and higher oil prices--should persist in the near term, it added.

Bonds:

Treasury yields gained amid a shifting economic outlook.

In the third quarter, the Fed raised interest rates once and stuck to a hawkish guidance.

Increasing Treasurys issuance and Fitch's downgrade of the U.S. government debt in August helped boost yields, which are forecast to keep trading higher in the fourth quarter.

The Fed has two more rate decisions this year.

"Friday's PCE on a core basis, which removes food and energy prices, suggests that inflation is continuing to decelerate, meaning the Fed's aggressive campaign is working. The challenge is that core PCE remains almost double the Fed's 2% target, prompting the Fed to keep the possibility of another rate hike in play," said BMO Family Office.

Energy:

Oil futures rose in Asia, as the fall in U.S. oil inventories and tight supply concerns resulting from cuts by Saudi Arabia and Russia weighed.

Analysts expect these concerns are likely to dominate oil price movements for the remainder of the year.

"That said, growing concerns of 'higher for longer' global interest rates will cap upside pressures, " OCBC said.

Metals:

Gold edged down amid elevated U.S. bond yields and a strong dollar.

"The higher-for-longer narrative we have seen with regard to Fed monetary policy has weighed on sentiment for gold," ING said.

Meanwhile, ANZ noted that the precious metal sold off heavily last week, with speculators having liquidated near 16 tons of long positions for the week ended Sept. 26.

"With the US dollar remaining strong, we see little scope for a strong rise in metal prices in the coming months, given their historical inverse relationship with the greenback," BMI said.

---

Copper edged higher, supported by possible buying by commodity-trading advisors.

Price movements in the copper market have spurred CTA buying activity over China's holidays, TD Securities said.

Although the strength in LME metals' prices may spark hopes of an improving demand outlook, the brokerage's commodity return decomposition framework continues to suggest weak demand and confirms its view that price action is driven mainly by a short squeeze amid a low-liquidity environment.

TODAY'S TOP HEADLINES

Americans Are Still Spending Like There's No Tomorrow

Consumers should be spending less by now.

Interest rates are up. Inflation remains high. Pandemic savings have shrunk. And the labor market is cooling.

Congress Stopped a Shutdown, but Fights on Ukraine, Border Intensify

WASHINGTON-Republicans and Democrats set aside sharp policy differences to avoid a government shutdown. Now, they have just weeks to resolve fights over aid to Ukraine, heading off a surge in border crossings and the overall size of the federal government.

The surprise weekend votes to fund federal operations through mid-November avoided a partial closure that would have furloughed workers and risked delaying paychecks. But Congress did nothing to resolve the country's pressing fights on spending levels, aid to Kyiv or immigration policy-it merely deferred them. Complicating matters, House Speaker Kevin McCarthy (R., Calif.) is set to face an effort this week to oust him from his leadership role, after his harshest critic, Rep. Matt Gaetz (R., Fla.), said he would pursue a motion to vacate.

China Comes Under Growing Pressure to Fix the Country's Housing Market

Pressure is building on Beijing to intervene more forcefully to restore confidence in its reeling property market.

In the latest sign of stress for the market, people with knowledge of Beijing's decision-making said authorities are investigating whether Hui Ka Yan, the billionaire founder of heavily indebted property developer China Evergrande Group, attempted to transfer assets offshore while the company was struggling to complete unfinished projects.

China's Economy Picks Up Steam for Holiday

SINGAPORE-China's economy is showing signs of perking up after months of anemic growth, offering a glimmer of hope for the global economy as higher interest rates squeeze consumers and businesses in the U.S. and Europe.

Factories in September reported their first expansion in activity since the spring, while railway and flight bookings point to a bumper week ahead for tourism as China takes a break to celebrate its weeklong National Day holiday.

How Ukraine Tricks Russia Into Wasting Ammunition

Russian forces have destroyed about half the battlefield equipment that Ukrainian company Metinvest has produced for the country's military. Managers want Russian troops to target more of it.

At a workshop in central Ukraine, workers are busy making parts for howitzers, radar stations and mortars. They are all fakes. Metinvest churns out high-quality replicas that serve as decoys, seeking to lure Russian fire.

In U.S. Fights Over Ukraine Aid, Allies Fear Deeper Global Harm

U.S. political fights and presidential-election campaign rhetoric are casting a shadow over battlefields in Ukraine.

Kyiv's fight to beat back invading Russian troops depends on American equipment, training and intelligence. President Biden has led a global campaign to rally support for Ukraine and to impose sanctions on Russia.

U.S. Seeks to Calm Tensions in Balkans

U.S. officials sought to defuse rising tensions in the Balkans, as a surge in violence there pushed NATO to boost its presence in the area and threatened to trigger a broader conflict between Serbia and Kosovo.

Long-simmering tensions between Serbia and Kosovo escalated into violence last weekend when Kosovo police and well-armed Serbian gunmen engaged in a fierce battle. At the same time, the U.S. warned that Serbia has deployed troops on the border with Kosovo.

France Probes LVMH CEO Arnault Over Deal With Russian Businessman

PARIS-French prosecutors are investigating a deal between French billionaire Bernard Arnault and a Russian businessman for possible money laundering.

The Paris prosecutor's office said Friday that its investigation follows an alert from France's anti-money-laundering unit Tracfin, and that a preliminary probe has been under way since 2022. It declined to comment further.

For Tesla's Cybertruck, Another Sales Launch Date Comes and Goes

Tesla Chief Executive Elon Musk had stoked hopes this spring that the Cybertruck would finally arrive in the third quarter.

Turns out, buyers are going to have to wait a little longer.

Write to [e-mail]

Expected Major Events for Monday

00:01/IRL: Sep Ireland Manufacturing PMI

05:00/NED: Sep Netherlands Manufacturing PMI

06:00/UK: Sep Nationwide House Price Index

06:30/SWI: Aug Retail Sales

07:00/TUR: Sep Turkey Manufacturing PMI

07:00/POL: Sep Poland Manufacturing PMI

07:15/SPN: Sep Spain Manufacturing PMI

07:30/CZE: Sep Czech Republic Manufacturing PMI

07:30/SWI: Sep https://urldefense.com/v3/__http://procure.ch__;!!F0Stn7g!FTaUa9HVVeeC06xy64_8NXmE-u7wQWhUxo1uB8hg9W0oiaXklagA3PP6W98zZJ0mqR_WMYq8ZHBbTwYnbq5KFX_hhdQLkMgSigJON47Mo6Q$ Purchasing Managers' Index

07:45/ITA: Sep Italy Manufacturing PMI

07:50/FRA: Sep France Manufacturing PMI

07:55/GER: Sep Germany Manufacturing PMI

08:00/ITA: Aug Unemployment

08:00/GRE: Sep Greece Manufacturing PMI

08:00/EU: Sep Eurozone Manufacturing PMI

08:30/UK: Sep S&P Global / CIPS UK Manufacturing PMI

09:00/EU: Aug Unemployment

09:00/GRE: Aug Labour Force Survey

09:00/CYP: Aug Retail trade

16:59/AUT: Sep Unemployment figures

23:01/UK: Sep Shop Price Index

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

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

10-02-23 0015ET