The late return of the United States to boost European gains
Eurozone unemployment, PPI; German labor market statistics; UK manufacturing PMI; meeting of the Eurogroup of finance ministers of the euro zone; updates from Covestro, Deutsche Post, BNP Paribas, Galp Energia, Air Liquide, Holcim, Orpea, Scout24, ams-OSRAM, BP, CNH Industrial, Aker Solutions, Telenor, DSM, Investor, AngloGold Ashanti
A late rebound on Wall Street should help lift European stocks on Tuesday. In Asia, equities were mixed in light trading due to the Golden Week holiday; the dollar remained high; Treasury yields were stable; and oil and gold futures were little changed.
European stocks are set to recoup most of Monday’s losses after Wall Street staged a dramatic comeback to end higher
Major U.S. indices traded lower for much of Monday’s session, but rose in the past hour. The S&P 500 fell to its lowest intraday level since May 2021, which seems enough to boost value buyers, said Instinet chief executive Frank Cappelleri.
“Buying weakness…has been one of the few long strategies that has proven successful so far this year,” he said.
The rally in stocks came ahead of a two-day policy meeting of the Federal Reserve starting later on Tuesday, with the central bank broadly expecting to raise its benchmark rate by 50 basis points at the end of Wednesday’s meeting.
“It’s a choppy and jittery market,” said Sebastien Galy, macro strategist at Nordea Asset Management. “It’s been fed liquidity for a long time, and that’s been priced into equity expectations,” he said, a situation that is changing as central banks tighten monetary policy.
Read: Citigroup sales hit European stock markets with ‘flash crash’
Investors should position themselves for inflation rather than recession, said UBS Global Wealth Management, which expects stock markets to end the year above current levels.
Inflation is expected to fall from current levels, while remaining above pre-pandemic levels, while growth will slow in 2022 but not tip into recession, chief investment officer Mark Haefele said.
The wealth manager favors active portfolio management, focusing on assets that are expected to outperform in an environment of high inflation, rising rates and high volatility. He advocates value investing and building portfolio hedges, Haefele said.
The dollar weakened slightly in Asia but the USD index remained firmly above 103.50.
JPMorgan said value opportunities have emerged particularly in G10 FX, but the macro backdrop and policy are not conducive to uniform mean reversion.
Among the cheap currencies, “look for more JPY and GBP weakness. Among the rich, the EUR is a short… US growth has been resilient against the Eurozone; China now also experiencing a weaker trajectory, the US is even exceptional if it comes only from stability. Look for greater USD strength.”
The 10-year Treasury yield remained below the 3% level it briefly crossed on Monday, as investors braced for a sharp 50 basis point rate hike from the Fed this week.
Benchmark yields could pull back, however, if the Fed appears less hawkish than expected. “I think Powell will try not to stray too far from market expectations,” Piper Sandler’s Roberto Perli said. “But I think the market is already focused on a hawkish outcome, so if it just meets expectations, we could see a relief rally.”
The yield on the 10-year Treasury’s inflation-protected note – a proxy for real yields – stood at around 0.16% on Monday. That was up from minus 1.11% at the end of last year, but still well below the nearly 1.2% level reached at the end of 2018 when the 10-year yield crossed 3%.
Oil prices edged higher in Asia after rebounding from steep losses to end higher on Monday, with the US benchmark holding support near the $100 a barrel threshold.
Shanghai’s Covid-19 cases continue to decline, though energy markets are “reluctant to get bullish given the uncertainty,” said Ed Moya, senior analyst at OANDA.
He said prices appeared to have strong support at the $100-a-barrel level, but doubted a massive rally given the resumption of U.S. production and lower demand for gasoline.
Read Barrons.com: Why oil hasn’t climbed as EU weighs Russian crude ban
Gold futures were flat, stabilizing after posting their worst day in 2 months on Monday, as investors price in aggressive interest rate hikes from the Fed.
Expectations that the central bank will step up its approach to tackling inflation could put further pressure on the precious metal, DailyFX strategist James Stanley said, with a stronger dollar bearish for gold.
Even though nickel price volatility has eased in recent weeks, the disconnect between Chinese and London nickel prices remains significant, Macquarie analysts said.
Chinese nickel pig iron and nickel sulphate prices are trading at “major and unprecedented discounts” to the London Metal Exchange’s benchmark contract. Analysts said Chinese prices were depressed by a jump in supply from Indonesia.
“The nickel surplus expected in 2022 will likely be entirely in Class 2 materials, the magnitude of the deficit in Class 1 [battery grade material] reduced [but] not entirely eliminated. »
Economic recovery from the pandemic and war in Ukraine has driven unprecedented demand for fossil fuels, but that hasn’t come at the expense of investment in green energy, Macquarie CEO Shemara Wikramanayake said at the conference. the Macquarie Australia conference.
Wikramanayake said high energy prices are pushing businesses and consumers to invest in energy-efficient areas like electrification.
“The weight of available capital means there is still room for significant investment opportunities this year despite the specter of rising interest rates.”
She said Macquarie was working with resource customers on how to meet growing demand for critical inputs for electrification, such as copper, lithium, nickel and rare earths.
THE BEST TITLES OF THE DAY
Manufacturers could soon face demand issues due to supply chain grunts
Supply chain issues are a bear, but they’re better than the alternative of falling demand. The concern for some manufacturers must be that the latter could become a real concern in the coming months.
The Institute for Supply Management said on Monday its manufacturing activity index slipped to 55.4 in April from 57.1 in March. It’s still solidly above 50 – the dividing line between growth and contraction – but marked the lowest level since July 2020. Additionally, the index was boosted in April by a slowdown in supplier deliveries , which is generally a positive for manufacturing, but against the backdrop of ongoing supply chain issues counts as a negative. It was at a high of 67.2 from 65.4 in March.
Citigroup sales hit European stock markets with ‘flash crash’
Several European stock exchanges suffered a “flash crash” on Monday morning following sell orders from Citigroup Inc., according to people familiar with the matter.
Trading was halted momentarily in several markets after major equity indices plunged for a few minutes just before 10 a.m. Central European Time. Equities in the Nordic region were the hardest hit, although other European stocks also fell briefly on a day when stock prices around the world fell.
MGM Resorts offers $607 million to a Swedish online gaming company
MGM Resorts International is looking to expand its online business internationally, saying it has made an offer to acquire a European mobile gambling operator for $607 million.
LeoVegas AB, which is listed on the Nasdaq Stockholm Stock Exchange, offers online casinos and sports betting products in several countries in Europe. The deal, if approved, would expand the Las Vegas-based casino operator’s online reach. In the United States, MGM operates the online betting brand BetMGM in a joint venture with British gaming company Entain PLC.
EU accuses Apple of abusing mobile payment market power
European Union antitrust authorities on Monday accused Apple Inc. of abusing its dominant position by restricting access to the technology that underpins contactless payments on its mobile devices, bolstering the bloc’s efforts to crack down on alleged anti-competitive behavior by some of the world’s largest tech companies.
The European Commission, the executive arm of the EU, said it is challenging Apple’s decision to block developers of mobile wallet apps from accessing necessary hardware and software on its devices and to promote instead its own offer, Apple Pay.
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Major events expected for Tuesday
00:01/IRL: Apr Ireland Manufacturing PMI
06:00/ROM: Mars PPI
07:55/GER: April Labor market statistics (including unemployment)
08:00/GRE: Apr Greece Manufacturing PMI
08:30/UK: April S&P Global / CIPS UK Manufacturing PMI
09:00/EU: Tue Unemployment
09:00/EU: March PPI
10:00 a.m./POR: March Industrial Production Index
2:00 p.m./DEN: April exchange rate and liquidity
16:59/BEL: March PPI
23:01/UK: Tue Zoopla House Price Index
23:01/UK: April Shop Price Index
11:01 p.m. / United Kingdom: survey on SME trends in the 2nd quarter of the CBI
All times in GMT. Powered by Kantar Media and Dow Jones.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswire