MARKET WRAPS
Stocks:
European stocks fell on Tuesday after a top Federal Reserve official said he would err on the side of overtightening monetary policy rather than not doing enough to bring inflation down.
"Undertightening will not get us back to 2% in a reasonable time," Neel Kashkari said in an interview with The Wall Street Journal on Monday.
Shares on the Move
UBS shares rose more than 4% after the Swiss banking group beat forecasts for underlying profit in the third quarter, with results showing Credit Suisse contributed to revenue growth and new deposits.
Economic Insight
Spain's economy is expected to outperform the rest of the eurozone, with its gross domestic product growing more than the eurozone in both 2024 and 2025, HSBC said.
Spain's very resilient labor market is supportive for growth, alongisde higher real-wage growth and a recovery in tourism post-pandemic, it said, adding that this trend is expected to continue over the next two quarters.
"It remains a relatively positive picture [for Spain]," although caution is warranted on fiscal policy, HSBC said.
U.S. Markets:
Stock futures ticked lower, suggesting the recent winning streak on Wall Street could come to an end, while Treasurys rallied, bringing down yields.
Results from KKR, Carlyle Group and TPG will shed light on the state of the private-equity industry before the bell. EBay, Rivian Automotive and Robinhood Markets report after the market closes.
Stocks to Watch
Tripadvisor reported higher-than-expected quarterly sales and earnings per share. Its stock rose 12% in premarket trading.
Forex:
The euro edged lower but sentiment towards the currency has been helped by improved eurozone economic data, including the services PMI and German factory orders, https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!HqKBPyY-tsjrBt2aOAvnfuqtt6dRtxSV37WBk9slSq9cxqy3OsMCSYJQDo6AzssKourUcsrZVyQh_BYXvf-zctGNbbKA0Qrj46_AUX8iE5c$ said.
These "have helped restore a more optimistic atmosphere about the region's economy's ability to stabilize and restore growth, despite the tightening credit conditions," it added.
The dollar has recovered somewhat after its recent sharp losses, helped by weaker stocks and a steep fall in the Australian dollar after the Reserve Bank of Australia raised interest rates but signaled less need for further increases.
Bonds:
Eurozone government bond yields rose in early trading, with Commerzbank Research saying the recovery was already faltering "with Bunds weakening-also versus Treasurys."
German industrial production data, which showed a bigger-than-expected fall in September, could provide some respite to bonds, "but overall sentiment looks set to remain shaky and we stay cautious for now," Commerzbank Research said.
Italy's fiscal outlook is back in focus with Goldman Sachs Asset Management saying "lower growth combined with higher deficits will put upward pressure on Italian sovereign yields."
It is mindful of catalysts which could spark further widening of Italian BTP-German Bund yield spreads. These include a further rise in global bond yields, sharper slowdown in Italian nominal growth which could increase debt-to-GDP, further widening of the fiscal deficit and a potential earlier end to reinvestments under the ECB's PEPP.
Energy:
Oil prices moved lower as a stronger dollar and weak macro sentiment outweighed Chinese trade data that showed crude imports rose in October, ANZ Research said.
"The risk of rising oil prices and additional import quotas for the year encouraged refiners to buy more oil," ANZ said.
Despite the positive data, the dollar edged higher, with the market now pricing the chance of another rate hike from the Fed at 16%, up from 11% on Friday, according to Deutsche Bank.
Metals:
Base metals and gold were weaker in early trading, with the macro environment having lost some bullish momentum at the start of a quiet data week, according to Peak Trading Research.
"Last week's dovish Fed and softer U.S. job numbers pushed interest rates lower and weakened the dollar but investors are now waiting to see more inflation and employment statistics before pushing macro indices in either direction," Peak Trading added.
EMEA HEADLINES
Saudi Aramco Profit Falls on Lower Oil Prices, Volumes
Saudi Arabia's national oil company reported a fall in quarterly profit due to lower energy prices and volumes sold in the period, but kept its payout to shareholders at the previous-quarter's level.
Saudi Arabian Oil Co., known as Aramco, said Tuesday that net profit came to $32.58 billion in the three months ended in September, down 23% from $42.43 billion a year earlier, when it benefited from soaring energy prices following Russia's invasion of Ukraine.
AB Foods Sees Strong Primark Margin Recovery, Launches Buyback
AB Foods said it will provide further returns to shareholders after its fiscal 2023 profit rose, and that it expects fashion retailer Primark's margins to substantially recover on the back of easing costs.
The British conglomerate said Tuesday that it aims to buy back 500 million pounds ($617.1 million) in shares over the next 12 months. In October the group completed a GBP500 million buyback program.
Capgemini Backs Full-Year Targets After Revenue Growth
Capgemini confirmed its forecasts for the year after revenue grew in the third quarter despite a gradual slowdown that was also seen in previous quarters.
The French consulting and technology group on Tuesday posted revenue of 5.48 billion euros ($5.87 billion) for the three months to the end of September, up 2.3% at constant currency and 2% organically.
Engie Upgrades Outlook on Positive Performance, Reduced Risks
Engie raised its full-year guidance after what it called a continued good performance with reduced risks as it approaches the end of the year.
The French power utility on Tuesday said that it now expects recurring net income in a range of 5.1 billion euros to 5.7 billion euros ($5.47 billion-$6.11 billion), up from a prior forecast between EUR4.7 billion and EUR5.3 billion.
MTN Group Earnings Rise Despite Difficult Conditions; Backs 2023 Outlook
MTN Group said earnings rose in the first nine months of the year despite difficult macroeconomic conditions and inflation, and it backed its expectations for the full year.
The South Africa-based telecommunications group said Tuesday that earnings before interest, taxes, depreciation and amortization for the nine months to Sept. 30 were 70.31 billion South African rand ($3.84 billion) compared with ZAR68.40 billion a year before.
GLOBAL NEWS
China's Exports Tumble Again in Fresh Sign of Economic Trouble
SINGAPORE-China's exports fell for the sixth straight month, adding to pressure on Beijing to boost spending at home as a big rise in global interest rates and wars in Ukraine and the Middle East weigh on the world economy.
The figures add to signs the Chinese economy is still facing difficulties despite a recent pickup in growth. Though officials have expanded stimulus in recent weeks, reflected in a rise in imports, economists say that Beijing will need to do more in the final months of the year to prevent another slowdown as a drawn-out property slump squeezes investment and consumer spending.
IMF boosts China economic growth forecast
The International Monetary Fund on Tuesday upgraded its view of China's economy, citing a better-than-forecast performance as well as moves to bolster its ailing property market.
The IMF lifted its view on China's growth for this as well as for next year by 0.4 percentage points, taking its GDP view for 2023 to 5.4% growth and its 2024 GDP view to 4.6% growth.
Fed likely to cut rates below 3%, making bonds attractive now, Guggenheim says
Guggenheim Investments thinks investors should look past the carnage in bonds and gear up for the Federal Reserve to pivot to rate cuts.
While the investment team expects the Fed to leave its policy rate unchanged at a 22-year high of 5.25% to 5.5% over the next several meetings, they also see a recession as likely in the first half of 2024.
Senate Republicans Demand U.S. Border Clampdown as Condition for Ukraine Aid
WASHINGTON-A group of Senate Republicans are demanding a crackdown on asylum claims at the southern border and other policy changes as a condition for backing President Biden's $106 billion request for supplemental funding for Israel and Ukraine, the first move in what is expected to be a wrenching fight over approving the package.
The one-page proposal, put forward by a group of Republican senators including Sens. James Lankford (R., Okla.), Lindsey Graham (R., S.C.) and Tom Cotton (R., Ark.), represents the opening bid in negotiations with Senate Democrats and the White House, which has signaled some openness to immigration-policy changes. Biden's request included money for border operations, but didn't include any policy changes.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
11-07-23 0544ET
