Global Markets Await Powell's Speech Amid Economic Uncertainty

EMEA Morning Briefing : Stock Futures Muted at Start of Week

CPI data for Germany, Bavaria, North Rhine Westphalia, Saxony, Brandenburg, Hesse, Baden-Wuerttemberg; UK Nationwide House Price Index, balance of payments, GDP, business investment, money and credit; Italy CPI; no major corporate trading updates expected Opening Call: European stock futures were little changed at the start of the week. Asian stock benchmarks were mixed; the dollar and Treasury yields were steady; while oil and gold futures rose. Equities: Stock futures were muted fell early Monday as traders await a number of economic data releases this week, including eurozone inflation and the U.S. jobs report. Ahead of that, provisional inflation figures for Germany and Italy today will be watched for clues on the overall eurozone outcome. Meanwhile, the final estimate of U.K. second-quarter gross domestic product comes today, giving further details and alongside current account data. The release could garner more attention than usual as it will incorporate Blue Book 2024 revisions for GDP growth in 2021 and 2022 and apply new 2022 industry weights to quarterly growth in 2023 and 2024, HSBC said. Markets will also keep an eye on escalating tensions in the Middle East, with the potential for the war to expand beyond Israel, the Lebanese militia group Hezbollah, and the Palestinian militant group Hamas. Forex: "USD bears have yet to feel any fatigue and it seems like USD bulls cannot catch a break," Maybank said. "While we do see a weaker USD in the long term, we caution of USD rebound risks with some technical patterns forming in certain pairs (EUR) and heading into the elections where USD could find some support," it added. Bonds: Mergers and acquisitions are rising in the European banking industry which benefits holders of bank bonds, said Jakub Lichwa, portfolio manager at asset management company TwentyFour. The M&A process often involves stronger banks acquiring peers with tighter margins, which lowers the risks associated with expensive capital and enables banks to obtain cheaper funding, Lichwa said. "The ongoing M&A activity has added to already strong performance in the credit markets so far this year," he added. Energy: Oil futures edged higher early Monday. Prices have found some support due to lingering supply risks for oil markets, OCBC said. "Supply disruptions from Hurricane Francine, slumping Libyan oil exports, and escalating Middle East tensions have supported this upward momentum, " OCBC said. Israel struck targets in Yemen on Sunday while pressing on with an air campaign against Hezbollah in Lebanon. Metals: The Fed's recent larger-than-expected 50bp rate cut has boosted gold's appeal, OCBC said. Apart from rate cuts, rising geopolitical tensions in the Middle East have also contributed to gold's appeal, OCBC said, noting the recent flare-up between Israel and Hezbollah. - The Fed rate cut and Chinese stimulus are likely to accelerate demand for metals and other mined commodities, said Jefferies analyst Christopher LaFemina. "This provides for a very good fundamental backdrop for the mining sector, and it is happening just as sentiment had reached levels of extreme bearishness," he said. LaFemina reckons iron ore and met coal will be standout performers between now and year end, helped by seasonal tailwinds, while "copper should perform best over a 6-12 month horizon." TODAY'S TOP HEADLINES China Manufacturing Gauge Signals Continued Weakness in Economy China's manufacturing activity continued its run of decline for a fifth straight month, backing the case for stronger policy to tackle deepening economic challenges. The country's official purchasing managers index stood at 49.8 in September, pointing to continued fatigue in the world's second-largest economy, according to data released Monday by the National Bureau of Statistics. That compared with August's 49.1 reading, which was also under the 50 threshold that separates expansion from contraction. Stock-market rally faces crucial question: Will jobs data back case for big Fed rate cuts? Stock-market investors got what they wanted when the Federal Reserve delivered an extra-large September interest rate cut. A risk now is that strong jobs data in the week ahead could prove to be too much of a good thing, at least as far as Wall Street is concerned. "If you do come up with a very strong jobs number...that will definitely spook the equity market," Komal Sri-Kumar, president of Santa Monica, California based Sri-Kumar Global Strategies, Inc., told MarketWatch in a phone interview. The Stock Market Isn't All About AI Anymore AI fever has loosened its grip on the stock market. Gone is the first half of 2024, when investors' passion for artificial intelligence drove the market skyward even as stubbornly high inflation dashed hopes that the Federal Reserve would begin cutting interest rates. This $2.4 Billion Lithium Mine Is Caught Between Russia and the West This summer, tens of thousands of protesters in Serbia took to the streets to oppose a proposed lithium mine. Fueling the protests: suspected Russian disinformation. Russia is likely playing a major role in stoking opposition to the project, the U.S. and Germany say, seeking to undermine the development of what could be a key source of lithium for Europe's automakers. Far-Right Freedom Party Wins Historic Support in Austria Austria's far-right Freedom Party came in first in the general election Sunday, preliminary results showed, with a highest-ever showing amid growing anxiety about migration. The party, which has been facing criticism over corruption scandals and using anti-Islam and anti-immigrant rhetoric, won over 29% of the vote, according to projections. The result topped its previous high of nearly 27% in 1999. Israel Strikes Targets in Yemen as It Presses Air Campaign Against Hezbollah TEL AVIV-Israel struck power plants and a sea port in Yemen Sunday after the Houthi rebel group launched two ballistic missiles at Tel Aviv in recent days, as the Israeli military continued an air campaign against Hezbollah in Lebanon. The strikes in Yemen targeted the port city of Hodeidah as well as Ras Issa, the Israeli military said, and relied on dozens of aircraft, including jet fighters and refueling planes to hit the targets over 1,100 miles from Israel's border. The targets are used by the Houthis to import oil as well as Iranian weapons, the military said. The Disruptive Bank Deal Everyone Wanted-Until It Happened It is a deal that Europe has wanted for a generation: two big banks combining forces across borders, uniting economies and unleashing growth that has long eluded the region. Instead, Italian banker Andrea Orcel's surprise attempt to combine his UniCredit with Germany's Commerzbank has turned into a case study on what holds Europe back from keeping pace with the U.S. in economic heft. OpenAI's Complex Path to Becoming a For-Profit Company OpenAI's plan to convert to a for-profit company is meant to simplify the world's leading artificial-intelligence startup. Making that happen will be enormously complex. The ChatGPT maker is in the midst of raising $6.5 billion from backers including Microsoft and Nvidia, along with venture-capital firms and a United Arab Emirates state-backed company. An essential provision of talks is that OpenAI, currently governed by a charitable nonprofit, must within two years become a public-benefit corporation. That means its mission is to earn a profit while creating social good. If it doesn't, investors could take back their money. How Telegram Became a Hunting Ground for Criminals-and Cops When federal agent Chris Janczewski was trying to strangle the flow of money to an al Qaeda network in 2020, he first considered infiltrating an invite-only forum or hunting for clues on the dark web. Then the Internal Revenue Service criminal investigator found the group talking openly about its scheme in a public forum on Telegram-one of the thousands of channels where people discuss illicit activities ranging from peddling child porn to selling stolen identities. 08:30/UK: Aug Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit All times in GMT. Powered by Onclusive and Dow Jones.

North American Morning Briefing : Stock Futures Dip as Powell Awaited for More Rate Cut Clues

Stock futures were little changed on Monday as traders prepared for a week with crucial economic data. Jerome Powell is due to speak on the economic outlook, at 1:55 p.m. Eastern, a speech that comes after the Federal Reserve slashed interest rates just over a week ago. More key economic data is due later this week, including the ISM manufacturing index and the nonfarm payrolls report. "Rates markets continue to forecast 75 bps of rate reductions by year end, but job creation at or above 140k in September could lead to a reassessment of this dovish expectation," Lazard said. The vice-presidential candidates' debate is on Tuesday and individual sectors and stocks could jump around if there are surprises in the rhetoric. Ford and General Motors fell more than 3% each after Stellantis cut its 2024 financial guidance, citing deteriorating industry dynamics and Chinese competition. This comes as lingering weak consumer demand from China has hit markets worldwide. U.S. securities of Chinese companies such as Alibaba rallied premarket and Chinese stocks extended their rally after Beijing announced more stimulus over weekend . Elsewhere in Asia, Japanese stocks slid after Shigeru Ishiba became leader of the ruling Liberal Democratic Party. The former defense minister is seen as favoring tighter fiscal and monetary policy. Other Premarket Movers Coinbase Global, and MicroStrategy stock declined, as bitcoin prices fell below $65,000. CVS Health shares ticked up after Glenview Capital Management will meet executives from the healthcare company on Monday to propose ways it can improve its operations, a potential start of an activist stance by the hedge fund. NIO 's China unit secured an investment of 13.3 billion yuan, equivalent to $1.9 billion. Stock jumped in the U.S. Watch For: Chicago Business Barometer - ISM-Chicago Business Survey - Chicago PMI for September; Today's Headlines/Must Reads: - Defense-Tech Startups Need a New Supplier: Anyone but China - This $2.4 Billion Lithium Mine Is Caught Between Russia and the West - A Dockworkers Walkout Could Batter the American Economy and Tie Up U.S. Trade - Why Kamala Harris Wants to Stockpile Minerals You've Probably Never Heard Of MARKET WRAPS The dollar was steady as investors looked ahead to the speech from Powell for clues on the Fed's next steps. "A 50 basis-point cut from the Fed in November continues to be seen as a likely possibility," IG said, although it added that the speech was unlikely to change views much, though it might reinforce comments from the recent decision. ING said the currency was at risk of falling as nonfarm payrolls data on Friday could show the unemployment rate unexpectedly rose in September. "If we are right with our call for a tick higher in unemployment, expect a softer dollar as markets stick to expectations for a [50 basis-point Fed interest-rate cut] in either November or December." The euro rose after German regional data showed headline inflation eased in September but core and services inflation remained sticky. "The German data suggest that any decline in services inflation, which the European Central Bank has been paying particular attention to, could be small and/or mainly driven by the reversal of the boost from the Paris Olympics," Capital Economics said. Markets are pricing in a 93% chance of an October interest rate cut and this might be too high given the data, it added. Sterling was unmoved by data showing a slight downward revision to second-quarter U.K. gross domestic product growth, and could strengthen further against the euro in coming days in the absence of major U.K. economic data, ING said. Eurozone inflation data on Tuesday could cement expectations for a 25 basis-point ECB rate cut in October, potentially sending EUR/GBP below 0.83, ING said. "There isn't a major U.K. release until the October 15 jobs figures, with only the partial exception of the Bank of England's Decision Maker Panel survey [on Thursday]." Bonds: Credit investors were expected to stay in a wait-and-see stance ahead of European inflation and U.S. labor data this week, unfazed by the announcement of more stimulus for the Chinese housing market, UniCredit said. Energy: Oil prices rose, boosted by China's latest stiumulus measures aimed at stabilizing the country's property market, as well as supply disruption risks in the Middle East. Fears of a broader war in the Middle East grew after Israel launched airstrikes against Houthi targets in Yemen and Hezbollah targets in Lebanon. "The recent escalation of attacks in the Middle East is increasing the likelihood of Iran being directly dragged into the conflict, putting a significant risk around supply disruptions at the OPEC producer," ANZ said. Metals: Gold edged higher, with gains driven by optimism around further rate cuts and demand for safe-haven assets amid heightened geopolitical tensions. Meanwhile, optimism over the economic backdrop is growing, supporting the broader commodities complex . Jefferies said the Fed rate cut and China stimulus are likely to accelerate demand for metals and other mined commodities. "This provides for a very good fundamental backdrop for the mining sector, and it is happening just as sentiment had reached levels of extreme bearishness." Jefferies reckons iron ore and met coal will be standout performers between now and year end, helped by seasonal tailwinds, while "copper should perform best over a 6-12 month horizon." Copper Copper was higher, and BHP expects world copper demand will rise by roughly 70% to more than 50 million metric tons a year by 2050, and said the world will need roughly 10 million tons a year of new mine supply in the next decade. Rightmove rejected News Corp-controlled REA Group's fourth proposal, valued at 6.2 billion pounds ($8.29 billion), and called on the company to put forward its best and final offer ahead of Monday's bid deadline. The London-listed online property portal said it had fully considered the latest proposal and that Chairman Andrew Fisher agreed to meet with REA Chair Hamish McLennan to present the offer and start talks, with a further meeting held with executives from both companies. OpenAI's Complex Path to Becoming a For-Profit Company OpenAI's plan to convert to a for-profit company is meant to simplify the world's leading artificial-intelligence startup. Making that happen will be enormously complex. The ChatGPT maker is in the midst of raising $6.5 billion from backers including Microsoft and Nvidia, along with venture-capital firms and a United Arab Emirates state-backed company. An essential provision of talks is that OpenAI, currently governed by a charitable nonprofit, must within two years become a public-benefit corporation. That means its mission is to earn a profit while creating social good. If it doesn't, investors could take back their money. Boeing, Union Stall on Strike Talks. Pensions Are a Problem. Boeing and its machinists union haven't made any progress in recent talks to end a labor strike. If the union holds fast to one of its demands, it will be tough to end the work stoppage soon. Friday night, the International Association of Machinists and Aerospace Workers Local 751-the main union local representing some 33,000 Boeing employees in the Pacific Northwest-tweeted that talks between the two sides have broken off with little progress and "we have no further dates scheduled at this time." Chinese Property Stocks Surge as Barrage of Stimulus Continues Chinese property stocks powered higher in mainland and Hong Kong stock markets, thanks to a barrage of measures from Beijing to stabilize the country's struggling property market. The rally followed the central bank's announcement on Sunday directing commercial banks to lower mortgage rates for existing home loans by at least 30 basis points below the Loan Prime Rate before Oct. 31. Will China's Surprise Stimulus Work? The best week in 16 years for China's stock market was built on hope. Worse, it was built on hope for more state intervention, one of the reasons its economy is in such trouble to start with. Start with the hope. China went for a triple boost last week: cuts to interest rates and other easing, loans to investors and to companies to buy back their stock, and a promise of something "fiscal" in yet-to-be-defined size. Israeli Special Forces Launch Raids Into Lebanon Ahead of Possible Ground Incursion Israeli special forces have been carrying out small, targeted raids into southern Lebanon, gathering intelligence and probing ahead of a possible broader ground incursion that could come as soon as this week, people familiar with the matter said. The raids, which have included entering Hezbollah's tunnels located along the border, have occurred recently as well as over the past months, part of the broader effort by Israel to degrade Hezbollah's capabilities along the border dividing Israel and Lebanon, the people said. Republicans Deploy Cash to Crack Democrats' 'Blue Wall' in Senate WASHINGTON-A group aligned with Senate Minority Leader Mitch McConnell (R., Ky.) is planning to pour tens of millions of dollars into an effort to crack Democrats' "blue wall" with less than six weeks left to go before Election Day. In working to flip seats currently held by Democrats, the Senate Leadership Fund plans to spend $67.5 million on TV, radio and digital ad reservations in Pennsylvania, Michigan and Wisconsin. The super PAC, run by close McConnell allies, will add $28 million in outside spending to Republicans' effort to unseat Sen. Bob Casey in Pennsylvania, $17 million in Wisconsin to target Sen. Tammy Baldwin, and $22.5 million in Michigan, where the parties are fighting over an open seat currently held by Democrats.