EMEA Morning Briefing : Shares to Stall Ahead of U.S., Eurozone Inflation

MARKET WRAPS

Watch For:

Germany Ifo business climate index; no major corporate updates expected

Opening Call:

Shares in Europe could waver in muted trade on Monday given the public holidays in the U.S. and U.K. In Asia, stock benchmarks were mixed; the dollar consolidated; while oil and gold gained.

Equities:

European stocks may be off to a wobbly start, with investors looking forward to U.S. PCE inflation data and eurozone inflation figures due later this week.

Trade is expected to be quiet due to the Memorial Day holiday in the U.S. and a bank holiday in the U.K.

In a survey by The Wall Street Journal, economists expect the PCE price data, the Fed's favorite inflation measurement, to be an improvement compared to the first quarter, "but only a small one," according to Bank of America Global Research.

Eurozone inflation data will be closely watched ahead of a widely expected interest-rate cut by the European Central Bank in June.

Forex:

The dollar consolidated in Asia amid subdued trading, given the U.S. Memorial Day holiday.

The greenback can consolidate for most of this week in the absence of any major U.S. economic data until the PCE data on Friday, Commonwealth Bank.

An outcome less than 0.3% on-month on the PCE core reading could weigh on the dollar modestly on that day, it said.

Bonds:

Treasurys didn't trade due to the U.S. Memorial Day holiday.

Treasury yields finished little changed in Friday's shortened trading session after durable-goods orders jumped for a third straight month.

Separately, consumer sentiment darkened in May as inflation worries strengthened their hold, with a final reading from the University of Michigan falling sharply to 69.1 this month from 77.2 in April.

Energy:

Oil edged higher in Asia in possible position-adjustment.

Speculators appear to have increased their net WTI crude oil positions once again, but selling may be looming due to weakening trend signals, TD Securities said.

These signals could prompt large-scale selling by commodity trading advisors as energy supply risk premia continues to evaporate, it added.

Metals:

Gold ticked up, as traders waited for U.S. PCE data due out later this week to look for clues on the Fed's monetary-policy trajectory.

Although gold's near-term outlook seems neutral to slightly bearish, there could be a need to reassess the outlook when the data is out, said DailyFX.

The data is the Fed's preferred inflation measure, it noted.

Gold has a close relationship with interest rates, with higher rates reducing the appeal of non-interest-bearing bullion.

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Iron ore fell, with sentiment likely weighed by weaker supply and demand fundamentals, Guotai Junan Futures said.

While port inventories are accumulating, Chinese steel mills are relatively cautious in resuming blast furnace production, with molten iron production bottoming out recently, it said. Molten iron is used in steel production.

However, macroeconomic expectations remain strong, as demand in sectors like real estate and infrastructure is likely to be supported by the ultralong bonds that China will be issuing, it added.

TODAY'S TOP HEADLINES

China's Industrial Profit Rose in April as Stimulus Measures Kicked In

China's industrial profit rose in April, reversing a decline from the previous month, as Beijing's stimulus measures started to kick in and foreign demand for Chinese products improved.

Profits at China's industrial companies rose 4.0% in April from a year earlier, compared with a 3.5% drop in March, according to data from the National Bureau of Statistics on Monday.

End of Japan's Battle Against Deflation in Sight, BOJ Deputy Gov. Says

Japan is likely close to completely overcoming its decades-long deflation, according to Bank of Japan Deputy Gov. Shinichi Uchida.

"While we still have a big challenge to anchor the inflation expectations to 2%, the end of our battle is in sight," Uchida said in a speech Monday. "The labor market structure appears to have changed after the pandemic, and wages are likely to continue increasing," he added.

Wall Street economists expect 'friendly' U.S. inflation data this Friday

Expectations about the future path of Federal Reserve interest-rate policy has been on a roller coaster this year and the next potential swoon could come Friday with the release of the Fed's preferred inflation measure of consumer inflation.

Going into the week, the Fed is seen in a holding pattern, based on the hawkish policy comments in the minutes of the May policy meeting published last Wednesday.

Twelve Injured in Turbulence on Qatar Airways Flight to Dublin

Twelve passengers and crew suffered minor injuries after a flight from Doha, Qatar, to Dublin experienced severe turbulence.

The incident comes after a Singapore Airlines aircraft rose and fell about 400 feet in less than a minute, leading to the death of one passenger and injuries of more than 100 on board the aircraft.

Hamas Fires Rockets at Tel Aviv for First Time in Months

TEL AVIV-Hamas militants in Rafah on Sunday fired eight rockets at the Tel Aviv region, the Israeli military said, marking the first time that Israel's densely populated core has been targeted in four months.

Meanwhile, disagreements in Israel about the war effort reignited over the weekend after prominent right-wing Israeli figures, including Israeli Prime Minister Benjamin Netanyahu's son Yair Netanyahu, shared a video of a reservist soldier who appeared to be in Gaza calling for insubordination against the security establishment.

Gaza Cease-Fire Talks Could Restart as Pressure Increases on Israel

Mediators are making efforts to restart cease-fire talks between Israel and Hamas to halt fighting in the Gaza Strip, after an international court ordered Israel to scale back military action in Rafah.

Talks to pause fighting in Gaza and return some Israeli hostages held in the enclave could resume as early as the new week ahead, according to Israeli officials who want discussions to be renewed. Central Intelligence Agency Director William Burns, Mossad Director David Barnea and Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani met in Paris on Friday to discuss the matter, said an Israeli official who spoke on condition of anonymity because of the sensitivity of the matter.

Tesla Shareholders Advised to Vote Against Elon Musk's Pay Package

Proxy-advisory firm Glass Lewis has advised Tesla shareholders to vote against Elon Musk's multibillion-dollar pay package at the company's meeting next month.

In a 71-page report, Glass Lewis told shareholders that Musk's proposed compensation-recently valued at $46 billion-could dilute their existing holdings in Tesla. The package would concentrate his ownership, making him the largest shareholder "by a healthy margin."

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Expected Major Events for Monday

06:00/NOR: Apr Labour force survey SA, incl unemployment

06:00/NOR: Apr Credit Indicator C2

08:00/GER: May Ifo Business Climate Index

08:00/POL: Apr Unemployment

08:00/ICE: Apr PPI

13:00/BEL: May Business Confidence Survey

15:59/UKR: Apr PPI

23:01/UK: May Shop Price Index

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

05-27-24 0016ET