MARKET WRAPS
Stocks:
European stocks edged lower on Monday, reversing course after posting earlier gains, with investors balancing news that a shutdown of the U.S. government was averted, against the prospect of interest rates remaining high.
Stocks to Watch
A likely good third quarter for European car makers belies a tougher fourth quarter and foggy 2024 as underlying demand slows, Bernstein said, noting that Stellantis and Volkswagen have crimped production. Read more .
Berenberg remains positive on European defense stocks as it expects increased defense budgets will ensure sustained higher top-line growth. It said Rheinmetall is the best way to gain exposure to higher European defense budgets, particularly restocking of military equipment and surging ammunition demand. Read more .
Economic Insight
Lower industrial output points to collapsing demand in the eurozone, Pantheon Macroeconomics said. Demand continues to weaken, leading to lower output and factory job losses, it noted. This will help ease inflation in core goods prices, though Pantheon said that rising oil prices could counterbalance this trend. Read more .
U.S. Markets:
Stock futures gained and benchmark Treasury yields rose back above 4.6% after Republicans and Democrats set aside sharp policy differences to avoid a government shutdown.
The surprise weekend votes to fund federal operations through mid-November avoided a partial closure that would have furloughed workers and risked delaying paychecks.
On the data slate, the ISM Manufacturing PMI for September is due after the opening bell.
Follow WSJ markets coverage here .
Forex:
The dollar was slightly weaker, but UniCredit Research said the losses weren't convincing enough to look like they could mark the start of a downward trend.
"We remain skeptical that a shift in sentiment has occurred," it said.
The dollar's falls on Friday could simply represent position adjustments on the final trading day of September.
"After all, the DXY is still at around 106 and EUR/USD remains slightly below 1.06, even though lower-than-expected preliminary eurozone CPI data for September failed to affect the common currency."
Bonds:
European credit spreads are likely to see limited movement in the fourth quarter of 2023 as current levels are close to fair value, UniCredit Research said.
Spreads could end the widening seen last week as risk appetite improves following the U.S. funding deal, it added.
Energy:
Oil prices edged higher as tightening fundamentals continued to provide support to key benchmarks.
ING said the oil market remained well supported after the ICE Brent November contract expired at $95.31 a barrel on Friday, "which saw the oil market finishing the third quarter up a little more than 27%--its strongest performance since the first quarter of 2022."
Investors will be looking to the OPEC+ Joint Ministerial Monitoring Committee on Wednesday, ING said.
"The market will be eager to see if there are any signs of a change in the group's output policy, given the recent strength in the market."
Metals:
Base metals were mixed, with ING highlighting that latest inventory data from the LME that showed aluminum on-warrant inventories fell sharply by 50,225 metric tons on Friday to 173,875 metric tons, which it said was providing support to prices.
Gold remained under pressure over worries of further hikes from the Fed.
"The higher-for-longer narrative we have seen with regard to Fed monetary policy has weighed on sentiment for gold," ING said, adding that gold ETF holdings have seen 18 consecutive weeks of declines.
DOW JONES NEWSPLUS
EMEA HEADLINES
BAE Systems Wins $4.8 Bln Nuclear Submarine Contract From UK Government
BAE Systems has been awarded 3.95 billion pounds ($4.82 billion) by the U.K. government for the next phase of its nuclear-powered attack submarine program, part of a security pact between the U.S., U.K. and Australia.
The U.K. defense-and-aerospace group said Sunday that the funding will cover development work until 2028, allowing it to move into the detailed design phase of the program and begin to procure items with long lead times.
United Utilities Outlines Five-Year GBP13.7 Bln Investment Plan
United Utilities Group plans to invest 13.7 billion pounds ($16.7 billion) in its waste and wastewater infrastructure between 2025 and 2030, creating new jobs.
The London-listed water company on Monday said it has submitted its business plan for the five-year period, which would drive regulatory capital value growth of 8.7% a year.
Allianz Names Claire-Marie Coste-Lepoutre as New CFO; Renews CEO Mandate
Allianz appointed Claire-Marie Coste-Lepoutre as its next chief financial officer, replacing Giulio Terzariol, and renewed the mandate of Chief Executive Officer Oliver Baete until 2028.
The German insurer said Monday that Coste-Lepoutre, who currently is chief actuary and head of planning and controlling, will join its management board as CFO at the beginning of 2024, subject to customary regulatory approvals.
How Adidas Outran Nike With Its $500 'Super Shoe'
The new Adidas "super shoe" is designed to be worn only once-and to break world records.
Weighing in at 138 grams, or less than a third of a pound, the shoe is so lightweight that elite runners initially doubted it could hold up over a long race. Amanal Petros, a German runner who in 2021 set the national record in the men's marathon, laughed uncontrollably when he first held it.
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.
As U.S. Aid to Ukraine Falters, Europe Faces Its Own Limits on Help
KYIV, Ukraine-European leaders face a question they had hoped to avoid: If the U.S. steps back from leading Western support for Ukraine, could they fill the gap?
The question is hanging over Europe after the weekend decision in Washington to avert a partial government shutdown by passing a funding measure that excluded aid for Ukraine.
GLOBAL NEWS
China's Economy Likely to Slow in 2024 as Headwinds Persist, World Bank Says
China's economy is likely to slow next year due to continued domestic headwinds, the World Bank said in a report, cutting its growth projection for the country.
Factors such as the fading rebound from the reopening of the economy, its huge debt, and the weakness of its property sector will weigh on growth in China, the World Bank said in its semiannual outlook for the East Asia and Pacific region on Sunday.
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.
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.
A New Interest-Rate Regime Has Begun. These Are the Market's Winners and Losers.
Investors are struggling to make peace with a new reality: Interest rates are likely to remain higher for longer.
Stocks have tumbled, government-bond yields have risen and the U.S. dollar has climbed since Federal Reserve officials signaled two weeks ago that they might hold rates near current levels through 2024.
Democrats Still Publicly Back Biden for 2024. Privately, Their Fears Are Growing.
Publicly, top Democrats say they support President Biden running for re-election and think he can win. Privately, their worries are increasing but they are resigned to the idea that he isn't going anywhere, and there is no viable Plan B.
Polls have consistently shown that most voters, including the majority of Democrats, don't think Biden should run in 2024, and many have deep concerns about the 80-year-old president's age, fitness for office and leadership. Those fears have intensified as his approval ratings have declined-a recent NBC News poll showed Biden with a job approval of 41%, with 56% disapproving, compared with 46% approval, 50% disapproval in the same poll in January.
Matt Gaetz Plans Vote to Oust Kevin McCarthy After Speaker Avoids Shutdown
WASHINGTON-House Speaker Kevin McCarthy faced a direct threat to his leadership a day after crafting a deal to avoid a government shutdown, as his most prominent Republican critic said he would seek to oust him from the post.
(MORE TO FOLLOW) Dow Jones Newswires
10-02-23 0559ET
