European stocks held solid gains on Wednesday, with investors awaiting the minutes from the Federal Reserve's last meeting that will be scrutinized for insights for the central bank's efforts to tame inflation and the state of the economy.

A dim economic outlook and weak consumer sentiment have prompted investors to shift their views about the aggressiveness of central bank tightening. Markets are beginning to price in a pivot on policy from the Fed, despite inflation still being at a more than four-decade high.

The energy sector was in focus after the Norwegian government intervened to end an oil workers strike on Tuesday evening that threatened to more than halve the country's gas exports, a key source of energy for the region.

Stocks to Watch:

Adidas's full-year targets seem at risk as Chinese lockdowns continue to drag second-quarter sales and challenging macro conditions squeeze margins, Hauck & Aufhaeuser said, cutting its rating on the stock to sell from buy.

Earnings before interest and taxes at the German sportswear giant is expected to drop by 42% to EUR313 million in 2Q, with the margin down at 5.6%, the bank said. To meet its full-year guidance,

Adidas is banking on 20% adjusted sales growth in the 2H, which looks challenging as the broad-based price increases previously announced by the company could support profitability but also burden volumes, Hauck & Aufhaeuser said. It expects Adidas to post a full-year EBIT margin of 6.8%, compared with the company's 9.4% target.

Economic Insight:

The European Central Bank is aiming for a soft landing, Santander Asset Management said. The ECB wants to influence price developments quickly in order to prevent second-round effects and a sustained rise in inflation expectations above their price stability target, it said.

The central bank also wants to ensure that private households, companies and financial markets can cope with the tighter monetary policy and that a recession doesn't occur, the asset manager said. "The challenge for central banks is very big at the moment. It is very important that they clearly communicate their determination to fight inflation," it said.


Citi's global supply chain pressure index posted its first meaningful decline since January. The good news is that the retreat in the index suggests that pressures in the global goods sectors, which have been a central driver of inflation, might be easing, it said.

The bad news is that this looks to be occurring on the back of weaker global consumer demand for goods, especially for discretionary goods, and thus might signal rising recession risks, Citi warned. "This is hardly an all clear signal for supply chains," it said. There are many risks still in play, such as pandemic-related disruptions and economic challenges from the Russia-Ukraine war, Citi said.

U.S. Markets:

Stock futures wobbled ahead of jobs data and minutes from the latest meeting of the Fed.

"The momentum is clearly slowing and a recession is not impossible," said Northern Trust Wealth Management.

"[A] recession would probably look more like a garden-variety income statement recession and not the deeper and more damaging style of balance sheet recession that has followed large asset bubbles and suppresses consumer and corporate spending on a large scale."

Jobs data in the form of JOLTs job openings will also be closely watched as indicators of economic health. Signs of weakening could actually prove positive for stocks; should the U.S. economy appear weaker, it could tame further extreme moves from the Fed. Consensus expectations are for a print of 11.1 million job vacancies.

"U.S. JOLTs Job Openings will cause recession head-scratching above 11 million," said Oanda.


The pound rose even as U.K. Prime Minister Boris Johnson fights for political survival after two senior ministers resigned in protest of his leadership. Chancellor of the Exchequer Rishi Sunak and Health Secretary Sajid Javid, two of Mr. Johnson's most senior ministers, quit on Tuesday night following a string of scandals under Johnson's leadership.

"Sterling has tended to ignore the indiscretions of Boris Johnson's government--largely because the Conservatives have a large majority," ING said. However, the resignations will leave the prime minister "rocking," it said. It isn't clear whether new finance chief, Nadhim Zahawi, will represent a shift in economic policy, although he may be tempted to loosen fiscal policy earlier than expected, ING said.

Increased UK Political Uncertainty Considered Negative for Pound

Pound's Rise After New UK Finance Minister Appointed Might Prove Brief


Traditional safe-haven currencies of the dollar, Swiss franc and Japanese yen should continue to outperform in the near term on fears over weaker global economic growth, MUFG Bank said.

Price action in the currency market is "being increasingly driven by safe haven demand as fears over a sharper slowdown/recession for the global economy continue to intensify," it said. "Those intensifying growth fears are clearly evident now across a wide range of financial markets."


EUR/USD may fall further after breaking below critical support at 1.0350 on Tuesday, based on technical charts, UOB said. This break has been accompanied by solid downward momentum, and EUR/USD is likely to weaken further within these couple of months, the bank said.

While round-number levels of 1.0200 and 1.0100 could offer some support, the key level to monitor is 1.0000, UOB said. Only a break above declining trendline resistance and the 55-day exponential moving average, both of which are near 1.0510, would signal EUR/USD's downtrend from earlier this year has stabilized, it said.


Eurozone government bond yields edged higher, bouncing slightly after Tuesday's rally, but a flight-to-safety response is set to remain as growth concerns are spreading, analysts said. "Recession fears are shifting to Europe, triggering broad flight-to-Bunds and EUR weakness," Commerzbank said.

On Wednesday, Germany will launch the new 1.70% August 2032 Bund which is trading at a yield of 1.255% in grey markets, where bonds trade ahead of their launch. Besides Germany, Portugal will conduct a bond exchange operation, buying back 2023- and 2024-dated bonds and selling 2028- and 2035-dated ones.


Oil prices recovered some of the previous session's steep losses in early trading with SPI Asset Management suggesting Tuesday's price action "seemed to point to positioning and recession probabilities getting brought forward due to Europe's doomsday economic concerns."


Energy derivatives are likely to outperform base metals in the current weak macro environment, UBS said. The Russia-Ukraine war will likely continue to have a greater impact on energy vs. metal prices, with the EU's push to decrease its dependence on energy supply from Russia keeping prices buoyant, the bank said.

As the global economy moves beyond the Covid-19 pandemic, global consumption may also shift toward travel and services, which are energy-intensive compared with consumer-discretionary goods that have been a major focus of pandemic spending, UBS said.


Base metals were mixed in Europe and gold a touch higher, with CBA saying "industrial metal prices will likely continue to react the most negatively to global growth fears, rising interest rates and a surging dollar."




German Manufacturing Orders Unexpectedly Rose in May

German manufacturing orders increased slightly in May, beating forecasts for a decline amid rising producer prices and supply constraints.

Manufacturing orders rose 0.1% on month in adjusted terms, according to data from the German Economics Ministry released Wednesday.


Amazon Strikes Partnership Deal with Grubhub That Could Include Small Equity Stake Inc. agreed to add Grubhub to its suite of Prime services in the U.S., in a deal that also gives the e-commerce giant the option to acquire a small stake, the parent of the food-ordering company said.

Grubhub's parent, Netherlands-based Just Eat NV, said Amazon has an initial option to take a 2% stake in U.S.-based Grubhub, and U.S. Prime members can have their delivery fees waived from select restaurants. Amazon could bump up its total stake to 15% of Grubhub based on performance terms focused on adding new customers, Just Eat said.


Bang & Olufsen Swung to 4Q Net Loss, Cautions on Low Visibility Ahead

Bang & Olufsen AS said Wednesday it swung to a fiscal fourth-quarter net loss and cautioned that the outlook for the year ahead is subject to unusually high uncertainty due to high inflation, rising interest rates and the war in Ukraine.

The Danish consumer-electronics company posted a fiscal fourth-quarter net loss of 25 million Danish kroner ($3.4 million) for the three months to May 31. Analysts had expected a net loss of DKK28 million, according to a FactSet poll.


U.K. Chancellor Rishi Sunak and Health Secretary Sajid Javid Resign From Boris Johnson's Government

LONDON-British Prime Minister Boris Johnson suffered a potentially fatal political blow Tuesday as his treasury chief and health secretary resigned from his cabinet, saying they no longer had confidence in his leadership.

The coordinated departures of Chancellor of the Exchequer Rishi Sunak and Health Secretary Sajid Javid, two of Mr. Johnson's most senior ministers, represent a severe challenge to his ability to hold on to power.


EU Lawmakers Approve Sweeping Digital Regulations

European lawmakers approved two sweeping new pieces of digital regulation, paving the way for clashes between regulators and some of the world's biggest tech companies over how the rules should be applied.

The European Parliament on Tuesday voted its stamp of approval for the two laws-one focused on anticompetitive behavior, the other on content deemed illegal in Europe-after reaching an agreement on them with European Union member states in the spring.


Norway's Government Ends Strike After European Gas Prices Soar

The Norwegian government stepped in to end a strike that threatened to more than halve the country's gas exports, saying it was causing widespread risks to energy security.

Before the strike was halted, a benchmark for gas futures contracts in northwestern Europe rose as much as 14% to EUR172.88, or about $180, a megawatt-hour Tuesday, the highest level since March. Electricity prices across the region also rose, as many power plants run on gas.


Ben & Jerry's Sues Unilever Over Sale of Ice Cream Business in Israel

Ben & Jerry's is suing parent company Unilever PLC to block the sale of its Israeli business to a licensee, the latest twist in a rift over the ice cream maker's decision to end sales in Israeli-occupied West Bank and contested East Jerusalem.

In a complaint filed in U.S. District Court in Manhattan on Tuesday, Ben & Jerry's said Unilever's decision to sell the business in Israel last week was done without the approval of Ben & Jerry's independent board of directors.


U.A.E. Trade Provides Iran With Western Goods, From Perfume to Laptops

SHARJAH, United Arab Emirates-Workers crammed dozens of boxes into a wood-hulled dhow before it set sail from a Sharjah jetty, headed across the Persian Gulf for Iran. The cargo: a range of Western products from perfume to hair dryers and laptops.

"We are the Iranian Amazon," said the dhow's captain. "Business is booming."


Israel-Lebanon Maritime Dispute Threatens Gas-Extraction Plans

TEL AVIV-Threats from Iran-backed militant group Hezbollah could stall Israel's plan to deliver natural gas to Europe, Israeli officials said, as Israel's caretaker prime minister pursued help from France to defuse a crisis over its maritime border with Lebanon.

The border dispute risks turning into an armed conflict after Hezbollah, the Lebanese militant and political group that has fought several conflicts with Israel, threatened to take action aimed at stopping work in the Israeli-controlled Karish gas field.


CureVac Sues BioNTech Over mRNA and Covid Vaccines. Pfizer Stock Isn't Spared.

CureVac is suing BioNTech over intellectual property rights linked to mRNA technology, putting the Covid-19 vaccine developed by Pfizer and BioNTech in the crosshairs.

CureVac (ticker: CVAC) said Tuesday that it had filed a lawsuit in the German regional court in Düsseldorf against BioNTech (BNTX) and two of its subsidiaries. The company said it is seeking fair compensation for the infringement of intellectual property rights that aided in the manufacture and sale of Comirnaty-the ubiquitous Covid-19 vaccine developed by BioNTech and Pfizer (PFE).


NATO Advances Sweden, Finland Toward Membership as Fighting Rages in Eastern Ukraine

Russian artillery pounded Sloviansk, one of Ukraine's last lines of defense to protect the remaining Kyiv-held strongholds in eastern Ukraine, while the North Atlantic Treaty Organization on Tuesday advanced plans to add Sweden and Finland to the alliance.

Vadim Lyakh, the mayor of Sloviansk, reported "massive shelling" of the city in a Facebook post and said the central market was on fire. Pavlo Kyrylenko, head of military administration in the eastern region of Donetsk, said on Telegram that at least two people died and seven were injured.



Food and Energy Inflation Spur New Social Spending Around the World

Governments around the world are rushing to cushion the blow of food and energy inflation, launching new subsidies and boosting social-spending programs to stave off unrest and hunger amid the rising cost of daily living.

The United Arab Emirates and Saudi Arabia are spending a combined nearly $13 billion to support lower-income citizens, while in Europe, governments from Germany to Greece, Spain and Portugal have in recent months announced tax rebates and energy subsidies.


Oil Prices Pulled Lower by Dimming Demand

Slowing demand and recession fears helped bring the benchmark U.S. oil price below $100 a barrel Tuesday, continuing a rapid turnaround from soaring levels in recent months.

Oil prices shot higher earlier this year as war in Ukraine disrupted supply lines and the world-wide postpandemic reopening lifted demand. That move has contributed to the persistent inflation that has gripped major economies in 2022. The growth outlook is darkening as central banks work to get inflation under control by cooling economic activity, pulling down traders' forecasts for oil demand.


Strong Dollar Sends Euro to Lowest in More Than Decade

A flight to the U.S. dollar pushed currencies around the world to their lowest levels in years, as economic prospects in Europe and elsewhere darkened under the cloud of soaring energy prices.

The euro neared a 20-year low against the dollar after natural-gas and electricity prices surged on the continent. Currency traders fear Europe's economy might buckle if Russia completely shuts off natural-gas supplies that are used for heating homes, keeping lights on and running factories. Energy prices were further boosted by labor strikes at Western Europe's largest gas fields in Norway.


U.S. factory orders jump 1.6% in May - but it's not quite as good as it looks

U.S. factory orders jumped 1.6% in May, but the increase was largely tied to petroleum-related products whose prices have risen sharply. A more recent survey of top executives suggests demand might be waning as the economy slows.

The increase in orders exceeded the 0.6% forecast of economists polled by The Wall Street Journal. The rise in new orders in April was also raised to 0.7% from 0.3%.


If Luxury Stocks Are a Good Inflation Hedge, Why Is No One Buying?

For the trinkets bought by the rich, inflation is running much hotter than for everyday groceries. Even with that enticing hedge, luxury stocks probably aren't about to fly off the shelf.

Luxury goods have an advantage over other consumer products: When top-end brands charge more, their designs can become more desirable to status-conscious shoppers. This gives the industry a reputation for offering investors inflation protection. Over roughly the last four decades, Forbes' Cost of Living Extremely Well Index, which tracks the price of goods and services such as luxury handbags, expensive watches and real estate management fees, has risen 5% annually, compared with 3% gains in the U.S. consumer-price index.


Accelerating Inflation in Asia Puts Pressure on Central Banks to Raise Rates

Accelerating inflation is rippling through the Asia-Pacific, stoking expectations that policy makers will need to keep ratcheting up borrowing costs to cool climbing prices.

Cautioning that inflation was yet to peak, Australia's central bank on Tuesday raised its interest rate by half a percentage point for the second straight month. The Reserve Bank of Australia increased the official cash rate to 1.35% from 0.85%-adding to June's 0.50 percentage-point hike and a 0.25 percentage-point increase in May-as Gov. Philip Lowe said higher rates would help create a more sustainable balance between supply and demand.


U.N. Atomic Chief Warns of Growing Nuclear Risks

The head of the United Nations nuclear agency gave a sharp warning Tuesday about growing nuclear risks, saying that Iran's activities risked a regional nuclear arms race and that Russia's occupation of Ukrainian nuclear sites threatened to imperil the agency's ability to ensure nuclear material wasn't being misused.

In a wide-ranging speech at the Australian National University in Canberra, Rafael Grossi, the head of the International Atomic Energy Agency, warned that "we are reaching a defining moment for global nuclear nonproliferation," in which the risks of the spread of nuclear weapons "pose a problem for everyone."


Highland Park Parade Shooting Suspect Charged With First-Degree Murder

A 21-year-old man who police said fired more than 70 rounds from a rooftop into a crowd gathered for a Fourth of July parade in the Chicago suburb of Highland Park, Ill., was charged with seven counts of first-degree murder.

The suspect, Robert E. Crimo III, allegedly planned the attack for weeks and dressed as a woman to hide his identity, officials said Tuesday.


CERN's Large Hadron Collider Scientists Reveal New Particle Discovery as Accelerator Research Resumes

The Large Hadron Collider resumed scientific operations on Tuesday after a three-year hiatus for repairs and upgrades, opening a new chapter in physicists' longstanding quest to understand the fundamental building blocks of the universe.

The resumption came shortly after scientists with the European Organization for Nuclear Research, or CERN-the international body that operates the collider-announced that earlier research conducted at the facility revealed three previously unknown subatomic particles.


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(END) Dow Jones Newswires

July 06, 2022 06:26 ET (10:26 GMT)

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