EMEA Morning Briefing : U.S. Inflation Data Awaited

MARKET WRAPS

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Trading updates from Inditex, TUI, British American Tobacco

Opening Call:

European stock futures traded lower ahead of U.S. CPI data due later. Asian stock benchmarks were mixed; the dollar steadied; Treasury yields, oil and gold advanced.

Equities:

Stock futures were lower early Wednesday as investors await U.S. inflation data later today, which will likely be the most important economic report before next week's Federal Reserve interest-rate decision.

Economists surveyed by The Wall Street Journal, on average, look for a 0.3% rise in both the CPI and its core reading.

Last Friday's November jobs report appeared to help further solidify market expectations for a December cut. Policymakers appear confident inflation remains headed toward their 2% goal in part due to expectations housing inflation has remained overstated.

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Fitch Ratings said home prices in six of the seven European countries in its latest Global Housing and Mortgage Outlook will see prices rise next year, though French home prices will likely bottom out. Home prices in France may be approaching their trough after a 3% expected decrease in 2024, according to Fitch.

"Political uncertainty has led to a 'wait-and-see' attitude among potential buyers, although housing shortages have contained price declines," Fitch said. The agency added that new construction in France hit a 27-year low this year on high labor and material costs.

Forex:

The USD will be heavily influenced by the U.S. CPI for November because it could shift expectations for a rate cut by the Fed next week, Commonwealth Bank of Australia's Joseph Capurso said. The CPI data is expected to result in market pricing for a 25bps rate cut by the Fed to increase modestly. Hence, the greenback could weaken, he added.

Bonds:

Investment-grade credit investors think the most under-priced risk is the possibility of the Federal Reserve raising interest rates, according to 17% of investors in the Bank of America credit investor December survey. Concerns about inflation rebounding in the U.S. are raising the risk of the U.S. Fed raising interest rates.

Another 17% think rising geopolitical tensions as the most under-priced risk, the survey showed. A 15% share of investors say global inflation rebounding is the most under-priced risk, BofA said.

Energy:

Market focus has shifted to macroeconomic factors, with the Fed expected to announce a rate cut next week, said Hani Abuagla, XTB MENA senior market analyst. A more accommodative monetary policy may stimulate energy demand in the U.S. and drive up crude oil prices.

However, traders remain cautious ahead of U.S. CPI data due later, which may influence the Fed's decision, the analyst said.

Metals:

Gold rose early Wednesday, supported by ongoing geopolitical tensions in the Middle East. Israeli missile ships destroyed naval vessels belonging to Syrian President Bashar al-Assad's forces which held dozens of sea-to-sea missiles, Israel's military said.

The power vacuum caused by the collapse of the Syrian government led by al-Assad raises concerns over regional stability and intensifies military operations in the area, Pepperstone's Quasar Elizundia said. "This growing instability has boosted demand for safe-haven assets such as gold."

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Iron ore fell in likely profit-taking after recent gains following signals of more forceful China policy support to come. Markets remain optimistic about Beijing's recent pledge to revive property markets and economic growth, ANZ said. China imported more than 100 million tons of iron ore in November as steel production recovered, ANZ added.

All eyes are on China's Central Economic Work Conference that started today for more stimulus measures.

TODAY'S TOP HEADLINES

Traders are pretty sure of a Fed rate cut. What happens if inflation data is too hot?

Fed-funds futures traders are around 85% sure the Federal Reserve will deliver a rate cut of 25 basis points next week - that's a level of confidence that's pretty much in line with history this close to a policy decision.

France Has a Debt Problem, But Europe Does Not

France has a debt problem, but the European Union in aggregate does not.

French lawmakers last week ousted a prime minister for the first time in more than a half-century. Central to the paralysis that has gripped French politics is the government's rising debt, which the ousted prime minister was proposing to tame through a combination of tax rises and spending cuts.

Ford's cutting jobs in Germany. Scholz wants Europe to step in.

German Chancellor Olaf Scholz has called for the introduction of Europe-wide measures to increase uptake of electric vehicles, in a speech at Ford Motor Corp's factory in Cologne, just weeks after the U.S. car maker outlined plans to lay off 4,000 of its European workers.

In the speech at Ford's EV factory on Tuesday, Scholz argued Germany should work to facilitate the "leap forward" toward "electromobility" by providing support for the country's car industry, including by subsidizing energy costs for EV battery makers.

The London Stock Exchange suffers another loss to the U.S.

Industrial equipment rental company Ashtead Group has announced plans to switch its primary listing from the London Stock Exchange to New York, in another major blow to the U.K.'s main stock market.

In a statement on Tuesday, the FTSE-100 index constituent company said it had "concluded that the U.S. market is the natural long-term listing venue" for its business which now generates "almost all" of its profits in the U.S.

EU Looks Into Google Ads Targeting Teens

The European Union's digital regulator confirmed it is looking into Google's advertising practices under an online content law that bans companies from using minors' data for targeted advertising.

"We can confirm that the Commission, on 18 September, has indeed sent a [request for information] to Google on the platform's advertising practices," the European Commission said in a statement Tuesday.

Micron Receives $6.2 Billion in Chips Act Funding

The U.S. government will support Micron Technology, America's largest maker of memory chips.

On Tuesday, the Biden administration announced the Commerce Department has awarded $6.165 billion to Micron via direct funding from the Chips and Science Act. The funding is expected to eventually support 20,000 jobs across New York and Idaho.

Super Micro Stock Tumbles. It Could Get Knocked Out of Nasdaq 100.

Super Micro Computer stock tumbled early Tuesday after a remarkable comeback that had brought the price almost back to where it was before a roller-coaster ride for the shares started in late October.

The sharp drop could be due to mounting fears that Super Micro might be ousted from the the Nasdaq 100-100 of the biggest companies listed on the tech-heavy Nasdaq stock exchange-in favor of Palantir or MicroStrategy. The annual reconstitution is expected to be announced on Dec. 13.

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Expected Major Events for Wednesday

07:00/ROM: Nov CPI

08:00/SVK: Oct Construction production

09:00/EU: Nov Long term interest rates statistics

11:00/FRA: Oct OECD Harmonised Unemployment Rates

11:00/POR: Nov CPI

15:59/UKR: Nov CPI

16:59/AUT: Dec OPEC Monthly Oil Market Report

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

(END) Dow Jones Newswires

12-11-24 0016ET