European Midday Briefing: Investors Remain Cautious Ahead of Key Data

Adam

Summary:

European stocks rose cautiously as traders awaited key U.S. data and potential Fed policy shifts. Commodities were mixed, while major European firms reported divergent updates on output and sales.

MARKET WRAPS Stocks:

European shares mostly rose on Wednesday as risk appetite improved, but investors remained cautious ahead of key data releases.

"While services PMI figures are due from pretty much everywhere, it will be last month's U.S. ISM survey that steals the lion's share of participants' attention , not least after the disappointing ISM manufacturing read on Monday," said Pepperstone.

The ADP private payrolls report is also due at 1315 GMT. It takes on more importance than usual as, due to the recent government shutdown, no more official jobs data are expected until after the Federal Reserve's December 10 decision.

Investors' rate-cut bets firmed after Trump said he would announce his choice for the next Fed Chair early next year and touted Kevin Hassett as a potential candidate. Hassett is expected to deliver on the president's calls for lower rates.

Markets are currently pricing in an 85% chance of a 25 basis point rate cut next week.

Shares on the Move

London's miners are among the biggest risers on the FTSE 100 index in opening trade. They are being supported by strong gold prices and expectations of an interest rate cut.

German carmakers' China earnings remain under pressure, Citi said.

With significant China overcapacity, dynamic new model and technology cycles, and low supply chain costs, Chinese manufacturers have undercut EU counterparts and led to sharp falls in European brands' market share and profitability in China.

U.S. Markets:

Stock futures continued to rebound after a worldwide selloff in risky assets on Monday.

Risk appetite has improved from a gloomy start to the week but an undertone of caution persists, said Mizuho Securities.

Forex:

The euro rose. Lower energy prices are a key driver of the currency's gains, ING said.

"Softer energy prices are sending the eurozone's terms of trade to the highest levels of the year and supporting the eurozone's external accounts , " it added.

The dollar fell after Trump touted Kevin Hassett as a potential candidate for the next Fed Chair and as investors turned cautious ahead of U.S. jobs data.

Nomura economists see several risks that could lead to a larger move lower in the dollar next year . The potential triggers include U.S. portfolio positioning, forex hedging risk, the Supreme Court's decision on Trump tariffs, issues around Fed independence, and U.S.-China trade de-escalation.

Bonds:

The cheapening dynamic in Bunds is calming down, with a new anchor level found at 2.75% for the 10-year Bund yield, Commerzbank Research said.

Government bond yield curves in the eurozone were expected to steepen , Metzler said.

Treasury yields traded marginally lower as investors took a cautious stance ahead of ADP employment and ISM services data.

Steepeners were set to be "the trade of choice" over the coming weeks in U.S. rates markets, Jefferies said.

Energy:

Oil prices rose in choppy trade as investors continued to monitor developments in Russia-Ukraine peace talks.

"Oil markets and prediction markets do not appear to price a large probability of a near-term peace agreement and removal of the sanctions on Russia oil," Goldman Sachs said.

Metals:

Gold edged higher in early trade. Gold's rally could be challenged if sentiment improves next year and asset allocations return to risky assets, said William Blair.

Prices were likely to remain range-bound until the Fed provides firmer guidance on its monetary policy trajectory, Sucden Financial said.

Copper

Copper rose. Bullish copper positioning continues to recover modestly , said Sucden Financial analysts, citing the recent Commitments of Traders report.

However, it still remains below the peak for investment funds marked in February, which could indicate more room to add.

Iron

Iron ore futures edged higher in early trade. Most analysts remain neutral as the fundamentals remain weak. Supply and demand are relatively sluggish , Everbright Futures said.

EMEA HEADLINES

Airbus Cuts Plane Delivery Goal Due to A320 Fuselage Quality Issue

Airbus said it was lowering its aircraft delivery target for the year due to a quality issue with metal panels on hundreds of A320 jets, a major blow to the group as it struggles to overcome supply-chain hurdles.

The European plane maker said Wednesday that it expects to deliver about 790 commercial planes to customers this year compared with a prior target of roughly 820, but reiterated its 2025 financial targets. Airbus dispatched 585 aircraft by the end of October.

Zara Parent Inditex's Sales Tick Up Ahead of Festive Season

Inditex, the owner of Zara, reported an acceleration in sales growth at the start of its final quarter and ahead of the key festive season, driven by the success of its fall/winter collections.

The Spanish fashion group, which houses other brands including Massimo Dutti and Pull & Bear, said on Wednesday that sales jumped nearly 11% at constant currency from Nov. 1 to Dec. 1 compared with the same period a year earlier.

Hugo Boss Shares Fall After Brand Realignment Triggers Sales Drop Warning

Hugo Boss shares fell after the fashion company said it expected sales to decline next year due to efforts to realign its brands in pursuit of higher profitability down the line.

Shares in Hugo Boss dropped 10% in early European trading Wednesday, bringing their year-to-date decline to nearly 22%.

HSBC Names Chairman After Yearlong Search

HSBC named Brendan Nelson as chairman following a yearlong search to fill one of the biggest jobs in the global finance industry.

The 76-year-old Nelson, a longtime partner at KPMG, joined the U.K. bank's board in September 2023 and had been serving as interim chairman since Oct. 1. Nelson's predecessor, Mark Tucker, stepped down as chairman on Sept. 30 and joined Hong Kong insurer AIA.

GLOBAL NEWS

Trump's Aides Cancel Fed Chair Interviews as President Homes In On Pick

WASHINGTON-The Trump administration canceled a slate of interviews set to start this week with a group of finalists to be the next chair of the Federal Reserve as President Trump again suggested he had made up his mind about who should lead the central bank.

Trump's team informed candidates that interviews scheduled for Wednesday with Vice President JD Vance had been canceled, according to people familiar with the matter. No reason was given for the decision. A person familiar with the matter said the cancellation was because of a scheduling conflict for the vice president. The person said it wasn't clear if the meetings would be rescheduled.

November ADP Jobs Data Could Complicate the Fed's Rate Decision

The latest private employment numbers are expected to show that the labor market remained relatively stable in November. That could create further divides among Federal Reserve officials when they set interest rates next week with less economic data on hand than usual.

The monthly ADP National Employment Report for November is set to be released at 8:15 a.m. Eastern on Wednesday. Economists surveyed by FactSet expect that the U.S. private employers added 40,000 jobs in November, though the Bloomberg consensus is for just a 5,000 monthly gain.

A Newly Confident China Is Jockeying for More Global Clout as Trump Pulls Back

BEIJING-China is flexing its muscles, showing new confidence fueled by a belief that President Trump's retreat from overseas commitments and his focus on the Western Hemisphere and trade deals create unique opportunities for Beijing.

As bonds between the U.S. and other democracies come under strain, Beijing's new assertiveness also stems from pride over China's prowess in future-defining technologies, from artificial intelligence to high-speed rail and clean energy. Those achievements come in parallel with a rapid military buildup.

Ukraine Goes After Moscow's Shadow Fleet in International Waters

The sun was setting over the Black Sea on Friday as a naval drone sped toward an oil tanker headed for a Russian port. The Sea Baby drone, developed by Ukrainian security services, slammed into the vessel's hull moments later, triggering a fireball that lit up the pink-hued sky.

The grainy footage-which Ukrainian intelligence says shows a strike on a Russia-linked oil tanker-offers a glimpse into Kyiv's widening campaign against Russia's energy architecture. Ukraine is now targeting the Kremlin's shadow fleet, which relies on an opaque web of ships to skirt sanctions on its oil exports and reap funds for its war in Ukraine.

Trump Says He Doesn't Want Somali Immigrants in U.S. as ICE Plans Operation

WASHINGTON-President Trump lashed out against immigrants from Somalia, saying he didn't want them in the U.S. and describing them in disparaging terms ahead of an expected federal operation against Somalis in Minneapolis.

"I don't want them in our country, I'll be honest with you...their country is no good for a reason," Trump said Tuesday, speaking at a cabinet meeting at the White House. "We're at a tipping point," he said, adding that the country would "go the wrong way if we keep taking in garbage into our country."

Pope Leo Urges the U.S. Not to Threaten Venezuela With Force

ROME-Pope Leo called on the Trump administration to work for change in Venezuela through dialogue and economic pressure rather than by threatening military action, against a background of rising tensions between Washington and Venezuelan leaders.

Noting U.S. talk of a possible military operation against Venezuela, Leo told reporters: "I believe it's better to look for ways of dialogue, perhaps pressure, including economic pressure, but looking for other ways to change, if that's what the United States wants to do."

Source: morningstar

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