MARKET WRAPS
Stocks:
European stocks were higher on Monday as traders awaited key central bank decisions this week.
On Wednesday, the Federal Reserve is expected to leave borrowing costs unchanged at a range of 5.25% to 5.5%, so investors will be keen to hear if Jerome Powell gives any clues about Fed trajectory in coming months.
Meanwhile, the Bank of England is also expected to stand pat on Thursday, while the Bank of Japan on Tuesday has the potential to rattle markets should it make comments on relaxing its yield curve control policy.
Stocks to Watch
NatWest's lowered capital return expectations and earnings-downgrades limit its re-rating, Jefferies said, double-downgrading its rating on the stock to underperform from buy and slashing its target price by 59% to 150 pence.
"New guidance around risk-weighted asset inflation suggests the market's capital return expectations for NWG are too high and will have to be reconsidered."
Setbacks from capital returns will have a greater bearing on multiples than those of net interest margin earnings-downgrades, it said, following the bank's update on Friday that saw shares tanking.
U.S. Markets:
Stock futures were rising after declines last week dropped the S&P 500 into correction territory.
Wall Street has a lot to contend with this week: the Fed rate decision, the monthly U.S. jobs report, and more corporate earnings with the highlight being Apple's quarterly numbers.
Stocks to Watch
Former Marvel executive Isaac "Ike" Perlmutter has entrusted his stake in Disney to Nelson Peltz's Trian Fund Management as it prepares to press the entertainment company for multiple board seats, WSJ reported. Disney shares were up 0.5%.
The United Auto Workers union announced late Saturday that workers would go on strike at another General Motors plant hours after the union announced it had reached a tentative agreement with Jeep maker Stellantis. GM shares rose 0.8%.
Forex:
The dollar should continue to hover close to multi-month highs, although it would be vulnerable to any slide in U.S. bond yields, DHF Capital said.
"Overall, the dollar index stayed near this year's high [for most of this month] and could continue to see strength."
Bonds:
Eurozone government bond yields dropped with the 10-year German Bund yield moving further below the 3% mark.
"Taken by itself, we think this suggests certain fatigue tendencies of the bond-negative momentum," LBBW said.
Moreover, the macro side provided price-supporting impetus for the euro bond market, LBBW said, referring to the last set of purchasing managers' indices. "Hopes of a positive economic turnaround have thus been severely dampened."
UniCredit Research said a break of the 10-year German Bund yield below 2.75%, the peak reached in March 2023, would help the long end to further recover towards the 2.50% area.
"This would require tame data in the eurozone, and today's release of 3Q German GDP and German inflation could be a first test in this respect."
More importantly, the release of eurozone inflation for October, due Tuesday, could provide further tailwind to bonds, albeit investors might prefer to stay on the sidelines until the FOMC meeting on Wednesday, UniCredit Research added.
Energy:
Oil prices moved lower in early trading, despite Israel stepping up its campaign in Gaza via land and aerial bombardment over the weekend.
Markets for now are seemingly thinking the conflict in Gaza will remain isolated, however ANZ said that any spillover into the wider region could threaten supply.
"The escalation of the war raises the risk around supply disruptions that have been hanging over the market since Hamas's attack," it said, adding that "up to 20 million barrels a day of oil is at risk either directly and through obstructed logistic if other Middle East oil producers become involved."
Metals:
Base metals and gold prices were rising as investors awaited key policy decisions from several central banks this week.
This is a big macro week, Peak Trading Research said, with the Fed decision due Wednesday and U.S. employment data due Thursday.
Peak said the Fed is likely to hold rates steady, but more importantly will be what the Fed says in its comments after regarding data and geopolitical risks.
Strong data would likely mean a strong dollar, it added.
EMEA HEADLINES
Germany's Economy Contracted Less than Expected in 3Q
The German economy contracted a little less than expected in the third quarter of 2023, driven by lower household consumption, and revisions to previous quarters meant the economy avoided a recession previously reported last winter.
Germany's gross domestic product shrank 0.1% from July to September compared with the previous quarter, adjusted for price, seasonal and calendar variations, according to preliminary data from the country's statistics office released Monday.
HSBC Holdings Third-Quarter Net Profit More Than Doubled
HSBC Holdings PLC's third-quarter net profit more than doubled as the London-based banking giant continued to benefit from higher interest rates and sharply higher noninterest income.
The Asia-focused lender posted net profit of $5.62 billion for the three months to Sept. 30, up from $2.00 billion in the year-earlier period, it said Monday. HSBC's pretax profit, the bank's preferred profit measure, rose to $7.71 billion from $3.23 billion.
Shein Buys Missguided Brand From Frasers
Chinese e-commerce giant Shein is adding Frasers Group's Missguided to its shopping basket.
Shein agreed to buy U.K. online women's fashion label Missguided from retailer Frasers for an undisclosed sum, the companies said on Monday.
IFF to Sell Cosmetics Ingredients Unit to Clariant for $810 Million
Swiss chemicals company Clariant AG will buy a cosmetic ingredients unit of International Flavors & Fragrances Inc. for $810 million.
New York-based IFF said Monday that it would use proceeds from the deal to reduce debt, consistent with previously announced plans to strengthen its capital structure.
U.K. Home Prices Fall Became More Widespread in October
The U.K. housing market saw widespread price falls in September, as higher mortgage rates and cost-of-living pressures squeezed buyer budgets across most local markets, according to new research published by Zoopla.
U.K. house prices fell 1.1% on year, the most dramatic slowdown in price growth since 2009. House price falls-previously concentrated in Southern England-are now hitting 80% of local markets, though the size of the declines remains limited below 5%, the real-estate company said Monday.
GLOBAL NEWS
Workers Are Doing Less Work for the Same Pay
Americans are increasingly getting paid for not doing work.
Growth in paid-time off-including family leave, sick leave and vacation-is widening the gap between the number of hours for which workers get paid and the number of hours they are actually on the job.
Higher Bond Yields Could End the Fed's Historic Rate Rises
Federal Reserve officials have said for more than a year that beating inflation could require them to hold interest rates higher for longer than investors expected.
The swift run-up in long-term Treasury yields-to around 5% from 4% in early August-suggests Wall Street now agrees. As a result, borrowing costs for U.S. businesses and households are rising in ways that could allow the Fed to suspend its historic run of interest-rate increases.
Does Strong Growth Fuel Inflation? Fed Debates Whether Old Model Still Applies
Since Federal Reserve officials last raised interest rates in July, the economy is doing two things that central bankers don't think it can sustain much longer: revving up activity and at the same time slowing inflation.
It has set off a debate within the central bank about how closely it should follow its traditional models of the economy. The debate is unlikely to affect the outcome of its meeting this week, when the Fed is set to hold interest rates steady to provide more time to see the effects of their rapid increases over the past two years.
Israel Makes Major Advance Toward Gaza City
TEL AVIV-Israeli tanks and infantry pushed into the outskirts of Gaza City on Monday and severed one of the main roads connecting the northern part of the Gaza Strip to the south, witnesses said, in a major advance that appeared aimed at encircling the enclave's biggest population center.
A spokesman for the Israeli military declined to discuss the locations of troops, but said operations inside Gaza were expanding as more armored vehicles, artillery and combat engineers joined the fight aimed at dismantling the Palestinian Islamist militant group Hamas and evicting it from Gaza.
Why Trump's Drastic Plan to Slash the Government Could Succeed
WASHINGTON-For decades, conservatives have tried-and largely failed-to fundamentally reshape the federal government. If Donald Trump retakes the White House, they might succeed.
In campaign speeches and statements, the former president has promised to eliminate the independence of key federal agencies, reduce protections for civil servants, deny citizenship to tens of thousands of people born in the U.S. and wrest control of some authority over spending from Congress. If implemented, those measures and others Trump has proposed would amount to the most sweeping overhaul of the government in modern times, legal scholars said.
Write to ina.kreutz@wsj.com
Write to us at newsletters@dowjones.com
We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
10-30-23 0700ET
