MARKET WRAPS
Stocks:
European stocks rose on Wednesday as investors awaited the release of U.S. inflation data for March.
These figures could be a key indicator of when the Federal Reserve will start cutting interest rates.
"Today's CPI data comes on the heels of Friday's strong payrolls data, which raised doubts about the need for the Fed to cut rates," IG said.
Shares on the Move
Philips said it reached a final agreement with the U.S. Justice Department and FDA on terms of a settlement related its Respironics ventilators, and backed its medium-term guidance. Shares rose 4%.
Stocks to Watch
BASF 's share price might have rallied, but further upside for the company could be hard to find, Deutsche Bank said, downgrading the rating on the stock to hold from buy.
MTU Aero Engines is expected to post an increase in sales but stable EBIT and per share earnings in the first quarter, as the aircraft-engine manufacturer's performance is expected to be hampered by supply-chain issues, Jefferies said.
European Central Bank
If there is any surprise at the ECB's meeting on Thursday, Mediolanum International Funds expects it being dovish, with Christine Lagarde "perhaps indicating a greater confidence that inflation is returning to target."
Mediolanum sees no reason to expect the ECB to deviate from its prior guidance of a rate cut in June, and also believes that data will likely justify a cut in July, too.
Mediolanum expects the ECB also cutting rates in September, October and December.
U.S. Markets:
Stock futures were higher ahead of the inflation data.
Economists forecast that consumer prices rose 3.4% in March from a year earlier, up from February's 3.2% rate.
Stocks to Watch
Delta is expected to report first-quarter earnings of 36 cents a share on revenue of $12.5 billion, up 5.5% from the first quarter of 2023. Shares were rising almost 1% ahead of the report.
Nvidia was down 0.3% premarket. Shares declined 2% on Tuesday and entered a correction, which is defined as a pullback of at least 10% from a recent high.
Forex:
Higher-than-expected U.S. inflation data for March should lift the dollar, Danske Bank Research said.
A monthly core CPI increase of 0.4% or higher could strengthen confidence in the Fed maintaining its current stance for a longer horizon, especially given strong March labor figures, Danske added.
"This would likely bolster the dollar within the G-10 space."
Danske hinted that U.S. CPI has exceeded expectations in the first months of this year.
Recent increases in oil prices could be lifting the dollar and pose a risk to BofA Global Research's expectations that the currency will fall by the end of the year.
BofA strategists remain negative on the dollar over the medium-term, and forecast EUR/USD to rise to 1.15 by year-end, as Fed interest-rate cuts should help lead the dollar lower, but elevated oil prices risk pushing the currency higher.
Bonds:
W ith 10-year Treasury yields north of 4%, U.S. bonds offer great value, Russell Investments said.
Although near-term recession risks have fallen from their peak, a soft landing still isn't guaranteed, it said.
"Treasurys can serve as an attractive diversifier and cushion the portfolio if a recession does materialize."
Russell Investments said Treasurys continue to offer an attractive current yield.
Norwegian government bonds have attracted solid demand at auctions and have seen a significant richening of asset-swap spreads, Danske Bank Research said, ahead of Norway's NOK4 billion auction of 2026- and 2034-dated bonds.
"NGBs are expensive versus swaps both in the long and the short end."
The move in the front end of the Norwegian bond curve has been driven by the reinvestment flow from the redemption of the March 2024-dated bond, Danske said.
It prefers buying Norwegian government bonds versus matching German bonds given the substantial yield pick-up to matching Bunds.
Energy:
Oil prices were little changed as markets assess diplomatic efforts in the Middle East and wait for key U.S. inflation data for more cues on the interest-rate path.
Reports citing figures from the American Petroleum Institute indicate a bigger-than-expected build in U.S. crude inventories last week, a bearish sign for the oil market ahead of official inventory data due later in the day.
Meanwhile, the U.S. EIA raised its Brent estimates for the year to $89 a barrel from $87 previously on expectations of strong global oil inventory draws this quarter and persistent geopolitical risks.
Market watchers now await oil-market monthly reports from OPEC and the IEA for a broader snapshot on the supply and demand outlook.
Brent crude is expected to trade in a range of $85 to $95 a barrel in the coming months on stronger oil-demand growth and the partial unwinding of OPEC+ output cuts in the second half of the year, according to UBS.
The bank lifted its forecast for both Brent and WTI by $5 a barrel compared to its previous estimates, saying it now expects the U.S. oil gauge between $80 and $90 a barrel.
Coal
Metallurgical coal prices look well supported, suggests UBS. It raised its long-term price forecast by $20/ton to $200/ton to move above consensus expectations of $190/ton.
UBS said supply constraints, especially in Australia, will keep the market in a structural deficit as Indian coal demand accelerates over time. UBS sees little capex being channeled toward new developments at a time when coal reserves at existing operations are depleting. Mine operators will also find it hard to lower operating costs.
Metals:
Gold futures rose 0.5% to $2,374.7 a troy ounce, hovering below Tuesday's record $2,384.5 an ounce as market focus turns to the crucial U.S. inflation data release.
The price of the precious metal is closely linked to interest rates and the consumer price index and Fed meeting minutes will provide insight into any potential plans for interest rate cuts, and the path toward monetary easing.
Chinese central bank demand also remained strong as it continued to diversify out of dollars and into gold, GOLDX said.
Commerzbank Research said there may be a rational bubble in the gold market .
After better-than-expected U.S. labor-market data last week, gold edged lower but recovered quickly, as investors may have seen it as a buying opportunity, it said.
EMEA HEADLINES
Tesco Launches $1.27 Bln Share Buyback; Expects Higher Profit as Consumer Sentiment Improves
Tesco launched a 1.0 billion-pound ($1.27 billion) share buyback and said it expects profit to rise in the year ahead, signaling improving consumer demand as inflation tapers off.
The U.K.'s largest grocer by market share expects to make at least GBP2.8 billion in retail adjusted operating profit-its preferred metric, which strips out exceptional and other one-off items-in fiscal 2025, plus around GBP80 million from the retained business of its banking branch, insurance and money services.
Philips Reaches Final Pact With U.S. Justice Department, FDA on Ventilator Recall
Philips said it reached a final agreement with the U.S. Justice Department and Food and Drug Administration on terms of a settlement related its Respironics ventilators, and backed its medium-term guidance.
The Dutch health-technology group said Wednesday that under the consent decree, Philips Respironics will continue to prioritize completing the remediation of the sleep and respiratory care devices under Respironics' voluntary June 2021 recall.
Bang & Olufsen to Adjust Investments as Europe, China Markets Struggle
Bang & Olufsen will continue to target a larger share of higher margin revenue but it will adjust the timing and size of investments amid challenging market conditions, including in key markets in Europe and China.
The Danish consumer-electronics company is working through what it calls its luxury timeless technology strategy, seeking to enhance the focus on customer experience, strengthen its positioning within the luxury segment and ensuring high product quality.
GLOBAL NEWS
Fitch Cuts China's Outlook as Fiscal Strain Starts to Bite
China's public finances are being strained by a shaky economy, a prolonged property slump and a rising fiscal deficit.
That is the verdict of global credit-rating company Fitch, which revised its outlook for China's A+ credit rating from stable to negative on Wednesday, while also affirming the rating.
Bitcoin Price Falls. Investors Brace for Halving, New Wave of Crypto ETFs.
Bitcoin fell below $70,000 early Wednesday as it awaits a new event to push prices one way or the other.
The biggest and oldest cryptocurrency climbed to a new record at almost $74,000 last month after U.S. regulators allowed exchange-traded funds for the digital asset. Hong Kong may approve its first Bitcoin ETFs next week, Reuters reported, citing unidentified people familiar with the matter.
4 things Wall Street will watch for when the Fed releases minutes of March meeting
Three weeks ago, the Federal Reserve held its policy rate steady at 5.25%-5.5% for the fifth straight meeting, Economists saw Federal Reserve Chair Jerome Powell's news conference as dovish, helped by the Fed's projection that it was likely to cut rates three times this year. Going into the meeting, many economists had thought the Fed might reduce that projection to two moves.
In the past, the Fed has used the minutes to send messages to the market and so economist are always on their toes.
European Court Says Climate Protection Is a Human Right
PARIS-In a major ruling Tuesday, Europe's top human-rights court gave a boost to climate activists who are suing for tough limits on greenhouse-gas emissions, a decision expected to affect dozens of climate lawsuits against governments and corporations.
(MORE TO FOLLOW) Dow Jones Newswires
04-10-24 0542ET
