MARKET WRAPS
Stocks:
European shares were modestly higher on Wednesday on signs that interest rates will fall in both Europe and the U.S.
Nomura said the European Central Bank won't change its rate outlook at its next meeting, but will cut its economic growth forecasts, which will lead to even more rate cuts being priced in.
"We also think markets are unlikely to heed any warning from Lagarde on market pricing being overly aggressive on near-term rate cuts," Nomura added.
Focus will be on more labor data from the U.S. "As a warm-up for Friday's labor market data (nonfarm payrolls), we get the change in employment, according to ADP," SEB said.
Shares on the Move
British American Tobacco said it expected a one-off impairment of $31.5 billion this year due to pressure on some of its traditional cigarette brands in the U.S., as it shifts focus to smokeless products. Shares fell around 8%.
Stocks to Watch
Nokia has confirmed a disappointing loss of business at AT&T to Ericsson , which will delay the achievement of a double-digit operating margin within mobile networks by up to two years, Deutsche Bank said. Deutsche lowered Nokia's target price to EUR3.50 from EUR4, retaining a buy rating.
The European retail sector is in for a tougher year next year , with global GDP growth expected to be around 2.5%, interest-rate pressure on spending and employment and continued geopolitical uncertainty, Deutsche Bank said.
Deutsche Bank downgraded H&M to sell from hold and lowered its price target to SEK160 from SEK175. It downgraded Inditex to sell from hold and lowered its price target to EUR35 from EUR37. Next is kept at hold, with the price target lifted to 7,700 pence from 7,350 pence.
The environment for the global car industry won't get easier in 2024 , but some companies are positioned better than others, Deutsche Bank said.
The bank's European stock picks for 2024 include BMW and Mercedes-Benz on pricing power inherent to the premium segment. Deutsche also named Forvia for its customer mix and limited exposure to EVs, and Pirelli and Michelin for their premium prices.
U.S. Markets:
Stock futures inched up, with more jobs data on tap.
The yield on the 10-year Treasury was 4.18%, after a 11.5 basis point decline on Tuesday after data showing job openings declined to a 28-month low.
Forex:
The euro weakened and looked vulnerable to further falls against the dollar due to increasing expectations of interest-rate cuts by the ECB next year and the U.S.'s growing yield advantage over the eurozone, Helaba Research said.
The euro has fallen below its 21-day and 200-day moving averages and is coming very close to support at the 100-day moving average, which if broken could see the euro drop, it said.
"If prices fall below this level, a significant correction would have to be considered."
Bonds:
BlackRock Investment Institute's expectation of slowing nominal GDP growth alongside a peak in policy rates in Europe creates a better backdrop for fixed income assets than in the past two years, it said.
However, it has recently turned tactically neutral from overweight in eurozone government bonds "as we think markets are overestimating the amount of easing [the] ECB is willing to deliver over the next 12 months, " it added.
BlackRock also closed its long-held preference for Swiss government bonds after robust performance in 2023.
Energy:
Oil prices were slightly higher after closing at their lowest level since July as skepticism around OPEC+ cuts continued to weigh on sentiment.
Saudi Arabia cut its official selling prices for its flagship Arab Light crude to Asia and other regions despite extending voluntary output curbs as part of an OPEC+ deal.
In an interview with Bloomberg earlier this week, the Saudi energy minister said OPEC+ curbs would be delivered in full and that the group could extend the cuts further into 2024 if needed. Yet, "the news has had a muted response so far," according to ING.
Metals:
Metal prices were rising, as a weaker dollar helped support commodities backed by the greenback.
"The outlook for gold futures in coming months remains largely contingent on the U.S. dollar," Commonwealth Bank of Australia said.
"The dollar has weakened since the beginning of November as markets have looked to price in more Fed Fund rate cuts over 2024. However, there is likely a limit to dollar weakness being tied to Fed Fund rate cut expectations next year," CBA added.
EMEA HEADLINES
TUI AG Shares Jump on Swing to Profit, Record Revenue
TUI AG shares jumped as much as 7.6% in early trade after the company reported a swing to net profit for fiscal 2023 on record revenue and said that it expects revenue for the year ahead to grow at least 10%.
Shares at 0806 GMT were up 32.0 pence, or 6.25%, at 544.0 pence, having peaked at 551.54 pence shortly after market open.
Merck MS Drug Fails to Meet Target of Late-Stage Trials
Merck's multiple sclerosis drug evobrutinib didn't meet a key goal in late-stage trials.
The German pharmaceutical company's phase 3 clinical trials for the drug did not achieve their primary target of reducing annualized relapse rates in people with relapsing multiple sclerosis, it said late Tuesday. The drugmaker was aiming to match the rate of Aubagio, an oral drug for the disease owned by Sanofi.
Rio Tinto Plans $6.2 Billion Investment in Guinea Iron Ore Project
Rio Tinto's single biggest investment over the next few years is likely to be a huge African iron ore project that could reshape global supplies of the steelmaking ingredient.
The world's second-largest miner by market value said Wednesday it expects to contribute roughly $6.2 billion to the initial development of the Simandou mine, including port and rail infrastructure needed to export the ore.
GLOBAL NEWS
SEC Head Warns Against 'AI Washing,' the High-Tech Version of 'Greenwashing'
Securities and Exchange Commission Chair Gary Gensler has warned businesses against "AI washing," or making false artificial intelligence-related claims, likening it to the greenwashing phenomenon that has been the target of an agency crackdown.
Gensler said Tuesday that securities laws bar phony claims and require companies to give "full, fair and truthful" disclosures.
Big Bank CEOs Warn Congress About Tougher Regulations
Chief executives from eight of the largest U.S. banks are expected to warn federal lawmakers Wednesday that tougher regulation on lenders will have dire consequences for the economy.
The big banks have become a frequent punching bag in Washington since the financial crisis of 2007-09. Since then, executives have had to appear frequently before the Senate Banking Committee to discuss industry issues.
Israel Presses Assault on Hamas's Last Major Gaza Bastion
TEL AVIV-Israeli forces pressed forward into southern Gaza's largest city in what is becoming a decisive battle of the two-month-old war with Hamas.
Israeli forces moving into the militants' stronghold of Khan Younis are entering a battleground of narrow streets packed with displaced Palestinians. In close-quarters combat, Hamas fighters there are defending their last major bastion in Gaza, home to its leader, Yahya Sinwar, and the location where Israel believes the group's other leaders are hiding and holding hostages.
Putin Seeks Closer Middle East Ties in Rare Overseas Visit
Russian President Vladimir Putin heads to the Middle East this week in a rare overseas trip focused on global oil markets, the conflict between Israel and Hamas and the war in Ukraine, analysts say, seeking to widen any gap between the U.S. and the key power brokers in the strategic region.
It will be a brief visit. On Wednesday, Putin is scheduled to travel to both Saudi Arabia and the United Arab Emirates, where he is aiming to strengthen Russia's relationships as Moscow grapples with the impact of Western sanctions. The following day, Putin will host Iranian President Ebrahim Raisi in Moscow, deepening ties that were bolstered last year when Tehran began supplying military drones for Russia to use in Ukraine.
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(END) Dow Jones Newswires
12-06-23 0556ET
