MARKET WRAPS
Stocks:
Stocks in Europe posted modest gains on Wednesday after strong Chinese PMI surveys fuelled hopes for the country's economic recovery after it lifted its strict Covid-19 rules.
"Choppy trading conditions are still evident this week although the latest Chinese PMIs have provided some cause for more optimism," OANDA said.
"It was already believed that the transition from zero-Covid to living with it was going smoothly but this survey data suggests businesses are now extremely optimistic about the future."
London-listed mining stocks were stronger on hopes of more raw material demand from China.
Stocks to Watch
Shares in BNP Paribas fell following a report that Belgium was preparing a partial sale of its stake in the French bank.
Citing Belgium's state participation agency SPFI, Reuters said Belgium would sell a third of its 7.8% equity stake. The agency will dispose of around 2.7% in the bank, reducing Belgium's stake to about 5.1%, Reuters said.
BNP Paribas and SFPI couldn't immediately be reached for comment.
Read BNP Paribas Stake Sale by Belgium State Won't Rock Boat
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Ferrovial's potential future listing in the U.S. makes strategic sense, Jefferies said.
The Spanish company announced a reverse merger on Tuesday, saying it will be absorbed by its Dutch unit which will seek listing in Spain and the Netherlands and later in the U.S.
"Ferrovial has around 90% of its equity value outside of Spain, where it expects further growth opportunities, especially in the U.S."
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Rheinmetall has bright days ahead, set to benefit from the restocking of equipment that western allies have dispatched to Ukraine, Berenberg said.
"We estimate that 6% of the total stock of heavy military equipment across 37 countries has been donated to Ukraine; however, the spread is wide and shortages are acute for certain products," Berenberg added.
Rheinmetall is primed to capture a share worth roughly EUR22 billion of order intake in the coming years linked to restocking heavy weaponry that was supplied to Kyiv.
Read Rheinmetall's Order Intake Expected to Surge This Year
Economic Insight
Germany's February inflation reading could exceed economists' expectations, as it happened on Tuesday with French and Spanish data, UniCredit Research said.
"A stronger-than-expected reading would affect euro area inflation, ultimately reducing the decline that analysts, including us, are expecting."
Tuesday's reaction in markets highlights how sensitive investors are to inflation readings despite a significant amount of European Central Bank tightening already being priced in, UniCredit said.
Consumer prices rose 8.5% in February in the most populous German state North Rhine-Westphalia, up from 8.3% in January, suggesting an upside surprise to pan-German inflation data, which is due at 1300 GMT.
Economists polled by The Wall Street Journal expect inflation to fall to 8.5% from January's 8.7%, measured by national standards.
U.S. Markets:
Stock futures rose as traders began the new month on a more optimistic note following signs of a recovery in the Chinese economy.
Economic updates set for release on Wednesday include the final reading of the S&P Global manufacturing PMI for February, followed by the February ISM manufacturing report and the January construction spending data.
Minneapolis Fed President Neel Kashkari is due to speak at 1300 GMT.
Stocks to Watch
AMC Entertainment reported a fourth-quarter loss that was narrower than analysts' expectations. But the stock was down 8% in premarket trading after it posted its 14th consecutive quarterly loss.
First Solar rose 5% after it issued earnings and revenue guidance for the full year ahead of analysts' expectations.
HP posted mixed results for its fiscal first quarter, as the PC and printer company continues to grapple with a soft demand environment for personal computers. Shares, however, rose 3% in premarket trading.
Novavax sank 25% after it said there was "substantial doubt" about its ability to continue operating through the year. In its earnings report issued on Tuesday after the market closed, the company said it expects to have enough cash to fund operations through 2023, but that expectation is "subject to significant uncertainty" related to revenue for the year, among other factors.
Rivian shares were down 8% after fourth-quarter revenue missed analysts' estimates and production guidance from the company disappointed.
Tesla's investor event for 2023 will take place after the closing bell, giving investors the chance to hear from Elon Musk about the company's strategy and future. Expectations are that Tesla will offer an update on its next-generation vehicle, potentially a less expensive car. Tesla stock was rising 1.2% in premarket trading.
Earnings
Lowe's, Dollar Tree, Kohl's and Wendy's are scheduled to report quarterly earnings before the stock market opens.
Forex:
The euro is struggling to rise materially against the dollar despite weaker U.S. economic data and expectations for more aggressive ECB interest-rate rises, but that could change, UniCredit Research said.
Softer U.S. data included Tuesday's consumer confidence index and Monday's durable goods orders, while higher-than-forecast French and Spanish inflation data boosted ECB rate expectations, UniCredit said.
EUR/USD is having difficulty extending gains much beyond 1.06 but it's "probably a matter of time" especially if U.S. data continue to prove soft.
Higher German inflation data and a drop in the ISM U.S. manufacturing purchasing mangers' index at 1500 GMT would potentially boost EUR/USD, UniCredit added.
Read Retracement Seen Overdue in Eurozone Rates Markets After Fast Sell-Off
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The dollar fell around 0.5% against a basket of currencies as the strong Chinese data drove investors to riskier emerging-market currencies, ING said.
"There were strong rebounds for both the manufacturing and service sectors which are feeding the narrative that a 2023 China recovery is the real deal," ING added.
It said the dollar is likely to remain slightly offered on Wednesday following the China PMIs and as the U.S. ISM manufacturing PMI should remain weak.
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Sterling's modest and brief gains after the U.K. and EU agreed a deal on post-Brexit Northern Ireland trading arrangements look sufficient, ING said.
Sterling's initial rise reflects a warmer political relationship between the U.K. and EU but the agreement to overhaul the Northern Ireland protocol isn't a game changer for the currency, ING added.
Any approval of the deal by Northern Ireland's Democratic Unionist Party won't make much difference to sterling, it said.
Weak U.K. growth and an "increasingly hawkish" ECB that favors further interest-rate rises will "probably keep EUR/GBP supported for most of the year."
Bonds:
Eurozone yields have continued to rise, with UniCredit Research saying Tuesday's inflation data from Spain and France has kept the selling pressure on government bonds.
The 10-year Bund yield remains above its end-2022 peak of 2.58%, "which leaves open the possibility of further spikes in the short term, as momentum is likely to remain a key driving force," UniCredit Research said.
"In any case, technical indicators are starting to indicate that the Bund future is in oversold territory, which suggests the room for additional selling is limited."
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The ECB kicks off quantitative tightening with little impact expected in the early stages, Citi said.
"The initial impact is likely to be benign with just 11% of EGB [eurozone government bond] redemptions rolled off over March-June."
The ECB starts QT in the Asset Purchase Programme portfolio with an average monthly reduction of EUR15 billion in March-June.
The impact of the ECB's quantitative tightening will become significant in the second half of 2023 "when we expect the ECB to stop all reinvestments of APP maturities when the ECB might roll off around 22% of all EGB redemptions," Citi said.
Energy:
Crude futures rose after data showed Chinese manufacturing activity climbed in February, lifting hopes the nation's reopening would boost demand for oil and raw materials.
China's official manufacturing PMI data, a gauge of factory activity, rose to 52.6 in February from the prior month's reading of 50.1. The increase was also stronger than the 50.5 figure economists had been expecting.
Still, another strong rise in U.S. inventories was tempering hopes for global oil demand. API figures released on Tuesday showed a 6.2 million barrel build in U.S. oil stocks.
Metals:
Base metals made solid gains on the Chinese manufacturing PMI.
Still, concerns linger about the economic picture in the U.S., with worries about Federal Reserve tightening limiting risk sentiment, SPI Asset Management said.
DOW JONES NEWSPLUS
EMEA HEADLINES
ECB rate pressures grow ahead of eurozone inflation data
Markets now think the European Central Bank will have to raise interest rates to a record high 4% if it is to make headway in crushing inflation that has been running at more than four times its 2% target.
It's a treacherous trajectory along which other important central banks like the Federal Reserve are also travelling, as they strive to combat the most intense price pressures in decades by slowing but not crashing their economies.
Puma 4Q Earnings Fell Amid Volatile Consumer, Retailer Demand
Puma SE reported a fall in fourth quarter earnings amid volatile consumer and retailer demand.
The German sporting-goods company said it made 1.4 million euros ($1.5 million) in quarterly net profit, compared with EUR7.9 million in the last quarter of 2021, on sales that grew 24% to EUR2.2 billion.
Persimmon 2022 Profit Fell on Charges; Sees Lower 2023 Completions, Profits - Update
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03-01-23 0553ET
