Global Markets Poised for Cautious Start Amid Economic Data Releases

North American Morning Briefing : Muted Open Seen for Stocks At Start of Data-Packed Week

Stock futures were looking for direction early Monday at the start of a the week that will deliver a series of important economic data points, including the latest readout of the Federal Reserve's preferred inflation gauge, due Friday. Thursday's weekly jobless claims figures will likely also attract attention, given the Fed's sharp focus on the jobs market. However the earnings calendar looks relatively quiet, with a few notables such as Costco, Jefferies and Micron due to report results. Several Fed officials are slated to speak this week, and investors will be listening to any clues they offer on their outlook for the remainder of the year. AAR is set to report on after close on Monday and S&P Global will report both its Manufacturing and Services Purchasing Managers' Indexes for September at 9:45 a.m. ET. Premarket Movers Intel Shares rose after Bloomberg reported that Apollo had offered to make a multi-billion investment in the company. News Corp's Australian real-estate website REA Group raised its offer for U.K. counterpart Rightmove to around $8 billion. News Corp also owns Dow Jones. TSMC and Samsung Electronics are in talks to build giant factories in the United Arab Emirates that could transform the industry, The Wall Street Journal reported. Watch For: Canada New Housing Price Index for August; Fed's Kashkari to participate in Kansas event, Bostic also slated to give a speech. - Amazon Fell Behind in AI. An Alexa Creator Is Leading Its Push to Catch Up. - Boar's Head Shutdown Deals a Hard Blow to a Battered Corner of Virginia The dollar edged higher after last week's Fed rate cut sparked a brief selloff in the currency. "FX markets are starting the week in a consolidative mood," ING said. The euro extended its earlier losses on weaker-than-expected German and French PMIs after eurozone PMI data trailed expectations. Sterling rose to its strongest level in nearly two and a half years against the euro after U.K. purchasing managers' index data missed expectations but still showed an expansion in activity and contrasted with very weak equivalent eurozone figures. Bonds: Aegon Asset Management has a strong view that the Treasury yield curve is too flat and is set to steepen. In anticipation, it is overweight on 5-year Treasurys and underweight 30-year Treasurys, it said. Deutsche Bank Research lowered its forecast for Treasury yields following the Fed's meeting to reflect a more rapid interest-rate cutting cycle. The updated forecast puts 2-year and 10-year Treasury yields in the middle of next year at 3.50% and 4.05% respectively, versus 3.95% and 4.25% previously. Yields across the curve are projected to be 30-50 basis points above forwards in the middle of next year, driven by a higher expected fed funds rate path and term premia compared to market pricing, it added. Energy: Oil prices rose on geopolitical tensions and dovish monetary policy in China, though demand concerns linger. Brent is enjoying a limited rebound after falling below $70 a barrel earlier in September as escalating tensions in the Middle East brought back risk premiums, though concerns around the level of global demand are still pressing, ING said. Israel and Lebanon-based militant group Hezbollah accelerated cross-border attacks overnight into Sunday, raising the possibility of all-out war. Meanwhile, Chinese sentiment appears to be improving after the central bank lowered the reverse repurchase rate by 10 basis points and injected more liquidity into financial systems, and hinted at the possibility of other measures to support economic growth, benefiting oil, ING added. Metals: Gold futures slipped, returning some gains from Friday's rally but hovering near all-time highs. Citi reiterated its bullish stance on gold, with baseline average price projections of $2,800-$3,000 per ounce in 2025. A sharp rebound in bullion ETF inflows and healthy central bank demand--excluding China--should drive prices higher sequentially over the medium-term, it said, although a steep third quarter decline in Chinese retail gold imports is likely to be a cap on investor enthusiasm and a bearish tailwind to monitor, it added. Iron Ore Chinese iron-ore capital investment rose just 4.3% on year in the first half of 2024, despite strong prices. Citi expects 2024 capex growth will be similar to 1H levels, keeping annual iron-ore investment more than 40% below a 2014 peak. TODAY'S TOP HEADLINES Google Emails Show Unease Over Advertising Dominance ALEXANDRIA, Va.-Trial proceedings in the U.S. government's antitrust case against Google's advertising business have provided a rare window into internal company anxieties about its central role in the buying and selling of ad space online. The Alphabet unit is on trial over its software used to place display ads, those ubiquitous digital billboards served in fixed boxes on millions of websites every day. Elliott Hill Loved Nike and Left It. Now He's Back as CEO Nike's incoming chief executive is known for welling up with tears when he speaks about the company because he cares so much about it. Elliott Hill started working at the sneaker giant in 1988 as an intern, taking calls from customers and moving boxes in a warehouse. Over more than three decades, he climbed to be one of its top executives before he was passed over for CEO and retired in 2020. South Korea Can Go Only So Far Copying Japan's Market Reforms South Korea is taking a page from Japan to boost its stock market. There are certainly some low-hanging fruits to pick, but the country's large family-controlled corporate empires, known as chaebols, could be an obstacle to more meaningful structural change. The country's stock exchange is set to unveil a stock index that will take into account factors such as profitability and shareholder returns. That is modeled after a similar move taken in 2014 by Japan, which uses its new index to essentially name and shame companies that failed to make the grade. Israel Calls On Civilians in Lebanon Near Hezbollah Targets to Evacuate TEL AVIV-Israel warned residents of Lebanon to evacuate from places near where Hezbollah stores its weapons as its military intensifies attacks against the militant group. The Israeli military launched a series of airstrikes in Lebanon on Monday morning in what it said was a pre-emptive assault targeting Hezbollah's military infrastructure. Dozens of airstrikes hit Lebanon, according to the country's state news agency. Israeli military spokesman Daniel Hagari said the airstrikes would continue in the near term and told residents of southern Lebanon to stay away from areas that would be targeted. Bipartisan Spending Deal Would Avert Shutdown, Aid Secret Service WASHINGTON-Congressional leaders on Sunday backed a bipartisan spending deal that would avoid a government shutdown before the election while also giving the Secret Service an extra $231 million to help protect presidential candidates during the final hectic weeks of campaigning. The proposal, backed by top Republicans and Democrats, would extend government funding until Dec. 20, giving Congress more time to figure out how much money to allocate each federal agency for the next fiscal year. The government faces a partial closure at the end of this month if lawmakers don't pass an extension. 12:30/US: Aug Chicago Fed National Activity Index (CFNAI) All times in GMT. Powered by Kantar Media and Dow Jones. AGNC Investment Raised to Overweight From Equal-Weight by Wells Fargo Annaly Capital Raised to Overweight From Equal-Weight by Wells Fargo Aptiv Raised to Overweight From Equal-Weight by Wells Fargo Ares Commercial Real Est Cut to Underweight From Equal-Weight by Wells Fargo Assembly Biosciences Raised to Buy From Hold by Jefferies BOK Financial Raised to Buy From Hold by Truist Securities Campbell Soup Raised to Buy From Hold by Argus Research Claros Mortgage Trust Cut to Underweight From Equal-Weight by Wells Fargo Dana Cut to Underweight From Equal-Weight by Wells Fargo Darden Restaurants Cut to Market Perform From Outperform by Bernstein Darden Restaurants Raised to Outperform From In-Line by Evercore ISI Group FedEx Cut to Hold From Buy by HSBC FedEx Cut to Underweight From Equal-Weight by Morgan Stanley FirstEnergy Raised to Buy From Hold by Argus Research Nike Investors Glad Donahoe Is Out, but Hill Has Long Road Ahead -- Analysis Notable Labs Cut to Market Perform From Market Outperform by JMP Securities Par Pacific Holdings Cut to Neutral From Overweight by Piper Sandler PBF Energy Cut to Underweight From Neutral by Piper Sandler PepsiCo Cut to Equal-Weight From Overweight by Morgan Stanley Prosperity Bancshares Cut to Hold From Buy by Truist Securities Rapid7 Cut to Sector Perform From Outperform by RBC Capital Valero Energy Cut to Neutral From Overweight by Piper Sandler Velocity Financial Cut to Underweight From Overweight by Wells Fargo Visteon Raised to Overweight From Equal-Weight by Wells Fargo This article is a text version of a Wall Street Journal newsletter published earlier today.

EMEA Morning Briefing : Stock Futures Higher at Start of Week

Flash PMI data for EU, Germany, France, UK; no major corporate trading updates expected Opening Call: European stock futures rose early Monday, alongside U.S. equity futures and Asian stock benchmarks. The dollar edged higher; while oil and gold futures rose. Equities: Stock futures advanced as sentiment remained buoyant after the Federal Reserve kicked off its easing cycle last week, while a rate cut by China's central bank early Monday boosted hopes for more stimulus to come in the world's second-largest economy. Several Fed officials are slated to speak this week after that policy meeting decision, and investors will be listening to any clues they offer on their outlook for the remainder of the year. Markets are also awaiting the Fed's preferred inflation gauge, due Friday. - A strong recovery in the first half has led Fitch Ratings to increase its growth forecast for the U.K. economy. On Friday, Fitch affirmed its AA- rating for the U.K. and said it now expects 2024 growth of 1%, up from an earlier forecast of 0.2%. Inflation is forecast to average 2.6% in 2024 and 2.3% in 2025, according to Fitch. Forex: USD's retracement higher looks plausible to Maybank, as "the Fed easing narrative is already entrenched and USD bears may run into fatigue." A stronger U.S. economy relative to the rest of the world may also support the dollar, as "markets are already congruent with the Fed and ECB in terms of policy trajectory," Maybank added. Bonds: The outlook on euro-denominated credit looks positive and spreads are expected to tighten further into the year end, said Juan Valencia, European credit strategist at Societe Generale. "Unless we have a new shock to the system, [healthy] fundamentals and technicals should see credit spreads improve into year-end," he said. The supply of new euro corporate and financial bonds is expected to decline in the coming months, providing a boost to the market, Valencia said. Energy: Oil futures moved higher early Monday amid rising Middle East tensions that could lead to supply disruptions. Israel and Hezbollah quickened their cross-border attacks into Sunday with their leaders exchanging saber-rattling threats in a swiftly deteriorating situation. Geopolitical factors from the Middle East are offering support for oil prices, said Samer Hasn, senior market analyst at XS.com. There are increasing signs of the inevitability of a multifront regional war, the analyst added. Metals: Gold could be due for some profit-taking, said Fawad Razaqzada, market analyst at City Index and FOREX.com. However, the precious metal's outlook for the rest of 2024 remains modestly bullish, he said, citing his long-term objective of $3,000/oz. This is because of expectations that major central banks will probably be accelerating rate cuts, while factors such as geopolitical tensions and central banks' gold purchases set a positive stage, he added. - Copper prices rose slightly in Asia, thanks to ongoing positive sentiment after the Fed's rate cut last week, ANZ said. The aggressive 50bp rate cut may suggest weak economic conditions but recent data, including U.S. jobless data, have reinforced expectations that the world's largest economy will suffer a mild slowdown, ANZ said. In China, there are signs of improvement in recent weeks, the bank added. Premiums on imported copper have risen to their highest level since the start of this year, while inventories on the Shanghai Futures Exchange have been falling, ANZ noted. - Despite the Fed rate cut boosting investor sentiment and lifting iron-ore prices temporarily, inventories at ports are still at historic highs, Huatai Futures said. The consumption of iron ore is still down significantly as China's property sector shows no signs of bottoming out. While iron-ore prices could be supported by lower arrivals at Chinese ports due to typhoon disruptions in the short term, supply looks set to remain too high longer term, Huatai added. TODAY'S TOP HEADLINES China's Central Bank Announces Rate Cut, Injects Liquidity China's central bank has lowered a short-term policy rate and pumped more liquidity into the financial system, as it continues efforts to help boost the economy. The People's Bank of China cut the 14-day reverse repurchase interest rate by 10 basis points to 1.85%, and injected 74.5 billion yuan, equivalent to $10.6 billion, of liquidity via the policy tool, it said on its website on Monday. The Rate Cut Happened. Not All Borrowing Costs Are Going Down. The Federal Reserve is finally cutting interest rates. One key gauge of borrowing costs has been going up anyway. Yields on longer-term U.S. Treasurys have ticked higher since the Fed approved a 0.5 percentage point rate-cut last week. The yield on the benchmark 10-year U.S. Treasury note, which helps set interest rates on everything from mortgages to corporate bonds, settled Friday at around 3.73%, up from 3.64% the day before the Fed's move. The Fed Is Flying Blind. Investors Don't Seem to Care. You can spend a lot of time on Federal Reserve kremlinology, analyzing policymaker statements and forecasts. Or you can ignore what they say, and just look at what they do-as markets decided after the Fed's supersize rate cut on Wednesday. The basic question is whether half-percentage-point cuts are the new normal. Fed policymakers say not: Only one official predicted cuts of more than a quarter point at the two meetings between now and the end of the year. Two, in their "dot plot" forecasts, predicted no more cuts, and the rest said one or two cuts. Sorry, the Fed Can't Save Us From a Bear Market Wall Street commentary around this week's Fed rate cut could have filled a very long and boring book, but much of what you need to know about its effect on the stock market can be found in a movie rarely linked with monetary policy: "The Wizard of Oz." The great and powerful man behind the central bank curtain, Jerome Powell, really can't do as much as people think to keep their portfolios from shriveling if the wheels are already starting to come off the economy. Stocks' initial reaction to Wednesday's cut was exuberant. That often proves to be a head fake, though-we still don't know how this movie ends. Israel and Hezbollah Slide Toward Full-Scale War in Night of Intense Strikes Israel and Hezbollah accelerated their cross-border attacks overnight into Sunday with their leaders exchanging saber-rattling threats in a rapidly deteriorating situation that has the adversaries as close to full-out war as they have been in their nearly yearlong conflict. Dozens of warplanes struck southern Lebanon on Saturday night and into Sunday morning, Israel's military said, in what it called a pre-emptive attack against rocket-launching positions earmarked for a broader attack on Sunday morning. Residents in the area said it was one of the heaviest bombardments of southern Lebanon that they could recall since the conflict began. Roche Chairman Calls Industrial Subsidies a 'Waste of Money' SHANGHAI-The chairman of drugmaker Roche denounced the recent boom in industrial subsidies by the U.S. and European governments and called them a "waste of money." Roche's Severin Schwan used a visit to Shanghai for a business forum to criticize support that Western nations have increasingly offered to give their manufacturing industries a boost against competition from China and other nations. Chip Giants TSMC and Samsung Discuss Building Middle Eastern Megafactories Two chip-making giants have discussed building huge factory complexes in the United Arab Emirates that could transform the industry in the coming years and become a cornerstone for artificial-intelligence investments in the Middle East. Top executives at Taiwan Semiconductor Manufacturing Co., the world's largest chip maker, have visited the U.A.E. recently and talked about a plant complex on par with some of the company's largest and most advanced facilities in Taiwan, according to people familiar with the interactions. Google Emails Show Unease Over Advertising Dominance ALEXANDRIA, Va.-Trial proceedings in the U.S. government's antitrust case against Google's advertising business have provided a rare window into internal company anxieties about its central role in the buying and selling of ad space online. The Alphabet unit is on trial over its software used to place display ads, those ubiquitous digital billboards served in fixed boxes on millions of websites every day. News Corp's REA Boosts Offer for U.K. Property Platform Rightmove SYDNEY-News Corp-controlled REA Group increased its takeover offer for its U.K. counterpart Rightmove, continuing its effort to combine two of the English-speaking world's dominant real estate listing websites. Australia-listed REA said it is now offering 3.41 British pounds (US$4.54) in cash and 0.0422 new REA shares for each Rightmove share, for a total implied value of 7.70 pounds per share. The new offer values Rightmove's equity at 6.1 billion pounds, REA said. Brazil's Top Court Says X May Be Backing Down and Asks for Proof Elon Musk's X has moved to comply with a key requirement set by Brazilian authorities to allow X return to the country, but Brazil's Supreme Court says the social-media platform must provide more documents to prove its efforts. In an apparent reversal in X's strategy, the court said Musk's company had hired lawyers to represent the platform in Brazil, one of the main requirements imposed by the country's judiciary. How Intel Fell From Global Chip Champion to Takeover Target Three years ago, Intel was worth more than double its current value, and Chief Executive Pat Gelsinger was on the prowl for acquisitions. Now Intel itself is a takeover target, in a sign of how strategic missteps and the artificial-intelligence boom have combined to reshape the fortunes of America's most storied semiconductor company.