European Midday Briefing: Stocks Fall; France Rating Decision Due

Adam

Summary:

European stocks fell Friday ahead of Fitch’s France rating decision, with CAC 40 slipping. UK growth stalled in July. Gold surged on Fed rate-cut hopes, while oil dropped on oversupply worries.

MARKET WRAPS

Stocks:

European shares were down Friday ahead of a Fitch Ratings decision on France's sovereign rating.

The Stoxx 600 moved lower after gaining in the previous session supported by interest-rate cut hopes in the U.S. The CAC 40 was also slipping as investors braced for a potential France downgrade.

Societe Generale said the agency was likely to downgrade the country to A+, adding to investor caution and "reinforcing the case for a defensive stance."

In the U.K., new data showed that economic growth ground to a halt in July.

"The economy appears weighed down by weak household spending, subdued business investment, and persistent trade frictions," Moneyfarm said.

Shares on the Move

Mining stocks helped propel the FTSE 100 index to a record high in morning trade.

Much of the share-price growth has been concentrated on gold and silver stocks as precious metals continue to benefit from safe-have demand.

European oil stocks slipped in opening trade as worries about oversupply continued to mount. BP, Shell and TotalEnergies were among the fallers.

Economic Insight

It is still too soon for the European Central Bank and the market to fully rule out a rate cut just yet, Santander said. Santander maintained its long-held view that the ECB will not need to cut the deposit rate below 2%.

U.S. Markets:

Stock futures were falling Friday after surging to new highs the previous day on the back of hopes for interest-rate cuts.

Thursday's data showing labor market weakness could give the Federal Reserve more room to lean toward bolder action on rates if negative signals persist in the weeks ahead, according to XS.

Forex:

The euro was trading flat against the dollar. Commerzbank said the euro could rise above $1.20 but that won't necessarily pose a problem for the ECB.

The dollar edged higher against a basket of currencies, recovering only slightly from declines following Thursday's inflation and jobs data.

Commerzbank said the market took those readings as an opportunity to continue betting on significant interest-rate cuts by the Fed in coming months, despite higher inflation.

Monex Europe said the dollar was likely to remain weak even if it stabilized into the weekend with a light economic data calendar Friday.

Sterling fell slightly after the U.K. economy data.

Ebury said that re cent poor data alongside the threat of tax rises would "likely pour cold water on any growth revival in the second half of the year."

Bonds:

The 10-year Bund yield edged higher and SEB Research said it should trade in a 2.60%-2.80% range this autumn, and gradually rise next year, driven by fiscal pressure and Eurosystem balance sheet reduction.

It added that the two-year Schatz yield had only limited scope to fall, even if the ECB cut interest rates one more time.

Barclays said the pace of gross government bond supply in the eurozone was set to decelerate beyond September, given lower volumes of syndicated issuance.

Treasury yields rose in Asian trade, even as Thursday's CPI data were unlikely to be a game changer in the Fed's policy outlook.

SEB Research said Treasury yields were expected to move lower in the coming months, although not in a straightforward manner.

"Markets are choppy but the underlying trend points to lower yields."

Yields on gilts were steady after data showing that U.K. GDP was flat in July.

Energy:

Oil prices fell in early trade, extending the previous session's losses as concerns over looming oversupply and softening U.S demand overshadow geopolitical risks in the Middle East and Eastern Europe.

Metals:

Gold prices were poised for a fourth straight weekly gain on expectations the Fed would cut rates Wednesday.

"Softer U.S. labor data and an in-line August inflation print have given policymakers room to ease, while a weaker dollar and falling Treasury yields further support gold," MUFG said.

UBS reckoned gold would reach $3,800/oz by the end of 2025, up from a previous forecast of $3,500/oz.

The bank said expectations that the Fed would restart its easing cycle due to weak jobs data were fueling investor appetite.

Ongoing geopolitical uncertainties were also underpinning demand, it added.

EMEA HEADLINES

Sabadell Board Recommends Shareholders Don't Accept BBVA's $18 Billion Offer

The board of Banco de Sabadell recommended that its shareholders don't tender their shares to BBVA's hostile $18 billion takeover bid, which they have repeatedly said undervalues the bank.

The Spanish lender on Friday issued its board's opinion as the offer was finally put to shareholders earlier this week when BBVA received the last regulatory approval for the bid more than a year after it was first announced.

EU Won't Shy Away From Tough Antitrust Enforcement, Competition Chief Says

The European Union's top competition enforcer said officials couldn't let Alphabet's Google avoid a 2.95 billion-euro ($3.46 billion) fine for breaching the bloc's competition rules this month.

Speaking at a conference in Florence on Friday, Teresa Ribera said that Google "has repeatedly broken the rules of the game."

Russian Drone Incursion in Poland Tests NATO Defenses, Cohesion

The incursion of Russian drones into Poland marked a dangerous new phase in Moscow's confrontation with the West, posing a test for NATO allies and forcing them to divert more capabilities to the bloc's eastern flank.

In recent months, Russia has increasingly put historical rival Poland in its crosshairs. More Russian drones have violated Polish airspace, and an air assault on Ukraine in July damaged Warsaw's diplomatic mission in Kyiv.

Netanyahu Doubles Down on Elusive Goal: Conquering Hamas's 'Last Stronghold'

Ahead of a 2024 Israeli offensive in Rafah, Israeli Prime Minister Benjamin Netanyahu argued that the city in southern Gaza was the last bastion of Hamas, and "victory is within reach."

More than a year and a half later, the prime minister is once again predicting the war will be near its end if Israel captures Gaza City, the enclave's capital and what he says is Hamas's "last important stronghold."

GLOBAL NEWS

U.S. Stock Futures Largely Flat After Indexes Hit Record Highs

U.S. stock futures were taking a breather early Friday after all three indexes closed at fresh record highs. While data showed signs of elevated inflation, labor-market readings continue to indicate weakness and that means the Federal Reserve is all but nailed-on to cut rates next Wednesday. At the same time, an artificial-intelligence-driven tech boom has helped propel stocks higher. Due Friday, the University of Michigan's preliminary consumer survey for September will indicate how well sentiment is holding up.

-There was little movement in U.S. stock futures early Friday, with futures for the S&P 500 down less than 0.1% and futures for the Dow Jones Industrial Average off 0.1% after the index ended Thursday above 46000 for the first time. Nasdaq stock futures were up a touch.

Firm Inflation, Soft Jobs Data Pull Fed in Opposing Directions

Inflation firmed last month, with price increases picking up for goods such as cars and clothes and essentials like food and housing.

Consumer prices were up 2.9% in August from a year earlier, the Labor Department said Thursday, returning to the highest level since the start of the year. That was up from 2.7% in July and a recent low of 2.3% in April, but in line with expectations from forecasters, who have expected businesses to steadily pass along higher costs from tariffs on imported goods and materials.

Trump Pushes to Remove Fed's Lisa Cook Before Next Policy Meeting

The Trump administration is racing to sideline Federal Reserve governor Lisa Cook before next week's policy meeting, asking a federal appeals court to pause a lower-court order that restored her to the central bank's board.

In an emergency motion filed late Thursday, Justice Department lawyers urged the U.S. Court of Appeals for the D.C. Circuit to issue a stay by Monday, just one day before the Federal Open Market Committee meets to decide on a widely expected quarter-point rate cut.

China Warns Mexico Against Tariffs That Could Harm Chinese Goods

Beijing has warned Mexico to think twice before moving ahead with a plan to raise tariffs that could hurt Chinese automakers, saying it would retaliate against the measure.

"At a time when the U.S.'s abuse of tariffs has sparked widespread global opposition, countries should strengthen communication and coordination to jointly safeguard free trade and multilateralism, and must not sacrifice the interests of third parties due to coercion," a Chinese commerce ministry spokesperson said in a statement released late Thursday.

The Day After Tragedy Struck, a Utah Campus Comes to Terms With Its Grief

OREM, Utah-Sunrise broke over the Wasatch Mountains as usual on Thursday, but Phil Witt and his daughter, Sophie, knew this day was unlike any they had known.

"Surreal is very much how we feel," said Witt, who works at Utah Valley University, where Sophie is a freshman. "We both feel like we want to do something, but there's nothing really to do."

Brazil's Bolsonaro Sentenced to 27 Years in Prison

SÃO PAULO-Brazil's Supreme Court sentenced former President Jair Bolsonaro to 27 years in prison after finding him guilty of plotting a coup to overturn the 2022 election.

A panel of justices in Brasília voted 4-1 to convict Bolsonaro, setting the 70-year-old's jail term at 27 years and three months.

Source: morningstar

To stay updated on all economic events of today, please check out our Economic calendar

News, historical chart data, and fundamental company data are provided by FastBull Ltd.

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.