European equities rose on Wednesday following solid gains in
Asia, as recent worries over a possible banking crisis continued to
ING said every day that passes reinforces the conviction that a
line has been drawn under systemic banking worries, although the
recent sudden twists in market moves has taught the lesson to be
"We need to be as careful as possible...because turns in market
sentiment in recent weeks have been sudden and violent."
That said, ING is of the view that while markets spent the last
three weeks looking for "hairline fractures" in every bank's
balance sheet and business model, "there is a case to be made that
a large number of closets have already been checked for
Stocks to Watch
ArcelorMittal should have wind in its sails as steel-market
conditions improve, UBS said, upgrading its rating on the stock to
buy from sell and increasing its target price to EUR30.70 from
After the destocking of 2022, steel prices in Europe have risen
aggressively amid limited imports and a restocking trend, UBS said.
It expects the steelmaker to make $7.9 billion in 2023 Ebitda
compared with consensus of $7.5 billion.
Securing state funding for direct-reduced iron plants also
indicates clear progress toward decarbonization as customers commit
to paying premiums for low-carbon steel, UBS added.
"We expect positive earnings momentum in 1Q, 2Q driven by
improving prices, volumes and lower energy costs."
Infineon raised forecasts for its fiscal second quarter thanks
to its automotive and industrial businesses, Citi said.
"Upside was driven primarily by automotive and industrial power
control divisions, but we also expect the power sensing and
solutions division to have faced less pressure than anticipated,
leading to less underutilization charges and boosting margins,"
Infineon is now forecasting more than EUR4 billion in revenue
for the three months ending March 31, with its segment result
margin reaching a high-twenties percentage. Citi has lifted its
estimates to revenue of EUR4.04 billion and a margin of 28%.
Read I nfineon's Guidance Upgrade Underscores Business
LVMH's fashion division should help drive growth in the first
quarter, Citi said, as it raised its target price on the stock to
EUR925 from EUR917 and maintained its buy rating.
The company should at its update next month book group organic
sales growth of 8% in the quarter, little changed sequentially,
according to Citi.
The mainstay fashion and leather-goods business, home to Dior
and Louis Vuitton, should see 10% growth, while selective
retailing, which includes beauty giant Sephora and travel retailer
DFS, should lead the way with an 11% rise, Citi added.
Read Louis Vuitton Set to Go From Strength to Strength
The normalisation in both rates and equities continues, with
rates rising as the focus returns to high inflation numbers, Danske
Alongside that, sentiment is shifting to risk-on from risk-off,
Danske Bank said, adding that this has been pushing Treasury yields
In recent weeks investors flocked to safe havens amid the
unfolding banking crisis, but with signs that the banking turmoil
remains contained, the focus gradually turns back to fundamentals
and to the expected trajectory of central banks' monetary policy
Read Banking Sector Turmoil Causes Credit Investors to Favor
Less Risky Assets
Stock futures traded higher and bond markets steadied as
investors appeared increasingly relaxed about the health of the
bank sector and the prospects for interest rates.
Bank shares looked set to continue their recovery. Among
regional lenders, First Republic gained 3% premarket and PacWest
Bancorp rose 2%. Elsewhere, Bank of America added 1%.
Up ahead: U.S. pending-home sales for February are expected to
fall 3% from January. Also, regulators will appear before a House
panel to discuss the collapse of Silicon Valley Bank.
Follow WSJ markets coverage here .
The dollar is unlikely to gain significant ground until
uncertainty over the banking sector eases, Commerzbank said, adding
that the market remains more sceptical towards the U.S. than the
"That is why the dollar has a more difficult standing against
the euro, as the Fed has become a little more cautious whereas the
ECB has continued its rate cycle almost unaffected by the events of
the past weeks and continues to sound restrictive. As a result,
levels in EUR/USD above 1.08 seem justified."
Sterling could fall against the euro after recent gains, as the
ECB shows more resolve to raise interest rates further than the
BOE, ING said.
ECB member Madis Muller joined the "hawkish" rhetoric of other
policymakers Tuesday by signalling that there's still room to lift
rates, ING said.
"We saw EUR/GBP fall below 0.8800, but we don't expect the
pair's weakness to be very sustainable as we see the market pricing
for BOE tightening as too aggressive and policy divergence should
be a primary driver for a higher EUR/GBP."
Eurozone government bond yields edged higher, indicating
improving risk appetite and thus less demand for safe havens.
"Risk sentiment continued to be well supported overnight,"
Mizuho said, adding that markets remain generally well contained
within current ranges, on the lookout for any potential headline
that steers sentiment one way or another.
Inflation data for March are likely to be the next focus point
for bond markets, with Spanish and German CPI data due on Thursday,
followed by French, Italian and eurozone data on Friday.
Read Eurozone Government Bond Supply Forecast to Decline in
April Vs 1Q Average
Read Net Government-Bond Issuance in Eurozone Progresses Well in
Crude futures were higher on supply concerns and signs pointing
to strengthening U.S. demand.
The continued closure of a key pipeline for Iraqi oil is
supporting prices, ING said. The pipeline handles around 400,000
barrels a day of oil.
"Supply concerns continue to prop up prices," ING said.
Data on U.S. crude stocks reportedly showed a large drawdown
following weeks of rising inventories, slumping by over 6 million
barrels a day, according to API data.
Base metals and gold were weaker, with relative calm in the
markets following recent banking sector turmoil.
Deutsche Bank said the calm is most felt in bond markets and Fed
futures, with yields starting to rise and the market trimming
expectations of rate cuts from the central bank.
Commodities, especially oil, have been hit during the banking
crisis this month, but UBS expects prices to move higher for the
rest of the year, helped by a weaker dollar and higher demand from
UBS expects prices to broadly rise 20% in the next 12 months
with the gains led by energy and industrial metals, while gold will
also be a valuable hedge.
"Our stance is backed by China's recovery, an expected
inflection point in the Fed's rate-hiking cycle and the associated
weaker dollar, several unresolved supply-side issues due to lacking
investment or geopolitics, persistently low inventories in key
consuming countries, and ongoing weather risks."
DOW JONES NEWSPLUS
German Consumer Sentiment Set to Improve in April, Helped by
Lower Energy Prices
Consumer confidence in Germany is expected to improve again in
April, its sixth gain in as many months, prompted by lower energy
prices, though momentum in the month weakened as recession fears
Germany's forward-looking consumer-sentiment index forecasts
confidence to tick up to minus 29.5 in April from a downwardly
revised minus 30.6 in March, the highest level since July 2022,
according to data from market-research group GfK published
UBS Brings Back Former CEO Sergio Ermotti After Credit Suisse
UBS Group AG said its former leader Sergio Ermotti will return
as chief executive, as the Swiss banking giant moves into a new era
with its takeover of Credit Suisse Group AG.
Mr. Ermotti, who previously ran UBS for nine years, will start
on April 5 after the bank's annual general meeting, it said.
Next PLC Backs FY 2024 Guidance After FY 2023 Pretax Profit Beat
Next PLC said on Wednesday that pretax profit for fiscal 2023
rose ahead of the board's expectations and backed its guidance for
fiscal 2024 as it anticipates inflation will ease.
The FTSE 100 clothing retailer posted a pretax profit of 870.4
million pounds ($1.07 billion) for the year ended Jan. 28 compared
with GBP823.1 million for fiscal 2022. This compares with the
company's guidance of GBP860 million.
Roll-Royce's CEO Has a Turnaround Plan. The Stock Is Revving
Rolls-Royce is synonymous with classic British luxury cars. But
the company doesn't actually make cars anymore-that unit has been a
subsidiary of Germany's BMW since 2003.
Rolls-Royce still exists as its own company, though. It is
mainly an aerospace firm, making and maintaining high-powered
engines. It's more like General Electric than Ford.
Atos Shares Slump After Report Suggests Airbus Seeks Lower Price
for Evidian Deal
Shares of French IT company Atos SE plunged in Wednesday morning
trading after a report suggested that European plane maker Airbus
SE is seeking a lower price for a minority stake in Atos's cyber
At 0800 GMT, Atos shares traded 6.5% lower at EUR12.03.
ITA Airways Targets Higher Sales This Year Amid Network
ITA Airways is expecting a substantial increase in revenue this
year as the Italian carrier formerly known as Alitalia continues to
add routes in a bet on the continued recovery in air travel.
The airline ramped up direct flights to Asia, North America and
South America last year, adding routes from its hub in Rome
Fiumicino to New Delhi, the Maldives, San Francisco and Rio de
Janeiro, among other destinations. Travel restrictions and border
closures brought international traffic to a near standstill at the
height of the Covid-19 pandemic. Now, airlines are scrambling for
planes to expand capacity to meet surging demand for international
As Interest Rates Rose, Banks Did a Balance-Sheet Switcheroo
As the Federal Reserve's interest-rate hikes sent bond prices
plunging last year, some of the country's largest banks used a
simple accounting maneuver to help keep billions of dollars of
losses from piling up on their books.
They declared that they intended to hold on to large portions of
their money-losing bonds until they matured rather than selling
them, and they then changed the bonds' accounting labels
accordingly. From then on, the bonds would be frozen in time, no
matter how far their values fell in the market.
Banking Worries Fuel Gold Price Rally
Banking-sector turmoil and worries about the economy have gold
prices hitting $2,000 a troy ounce for the first time in a
The most-actively traded gold futures contract has jumped 7.4%
to $1,973.50 this month, reaching an intraday high of $2,014.90
last week and on pace for the largest monthly percentage increase
since May 2021. Prices hadn't topped $2,000 since Russia's invasion
of Ukraine last spring.
BlackRock says the market is wrong on the Fed. Here are the
bonds it's recommending now.
The Federal Reserve is going to stop throwing punches, but it's
not about to cut interest rates even as signs of fragility in the
financial sector emerge, says leading fund manager BlackRock.
In a note from the BlackRock Investment Institute, the fund
manager says the Fed, and other central banks, have made clear that
banking troubles wouldn't stop them from hiking interest rates.
International stocks outperform, decouple from U.S. equities by
International stocks are broadly outperforming this quarter,
decoupling from the U.S. to an unusual extent, according to
"Non-US stocks have decoupled from domestic equities by a
statistically unusual degree over the last 50 days," said Nicholas
Colas, co-founder of DataTrek, in a note Tuesday. This together
with their outperformance may bode well for flows into
international stocks heading into the second quarter, according to
Australian February Inflation Data Opens Door to Rate Hike
SYDNEY-Australia's inflation pressures cooled in February,
opening the door to a pause in the Reserve Bank of Australia's
campaign of aggressive interest-rate increases that began almost a
The monthly consumer-price index rose 6.8% in the year to
February, down from 7.4% in January and 8.4% in December, the
Australian Bureau of Statistics said Wednesday. Economists had
expected an annual CPI increase of 7.1% in February.
Lawmakers Scold Fed Over Silicon Valley Bank Collapse
Senators rebuked the Federal Reserve for failing to prevent the
collapse of Silicon Valley Bank despite identifying risks
beforehand, while the central bank's top regulator blamed the
firm's executives for not fixing its problems.
In an appearance Tuesday before the Senate Banking Committee,
Michael Barr, the Fed's vice chairman for banking supervision,
defended the actions of the Fed's supervisors and said the central
bank had privately raised concerns with SVB before its March 10
collapse and had given the lender poor ratings for managing its
Ukraine Downs Russian Warplane Near Bakhmut
Ukraine said its forces shot down a Russian warplane near
Bakhmut while repelling multiple attempts by the Kremlin's forces
to seize the eastern city, which has become an important prize in
the broader war.
Bakhmut, a small city in Ukraine's eastern Donetsk region, has
become a central battleground in Russia's assault on the country,
with the fight there taking on increasing symbolic and strategic
importance to both sides after more than six months of brutal
combat. Ukraine's forces have held out in the city against
overwhelming Russian firepower after the Kremlin's forces began
targeting the area last summer.
Kevin McCarthy Pushes for Debt-Ceiling Talks as Unity Eludes
WASHINGTON-House Speaker Kevin McCarthy tried to prod President
Biden into starting talks over spending cuts as a condition for
raising the debt ceiling, just as Republicans are struggling to
unite around a blueprint for negotiations ahead of dual deadlines
later this year.
The White House released its own budget proposal earlier this
month and has said it won't negotiate on spending until Republicans
put forward their own plan. Mr. McCarthy has rejected that notion
and said in a letter to Mr. Biden that talks should start as soon
as possible. While neither budget would have a chance of becoming
law, they serve to outline the parties' policy intentions.
Trump Grand Jury Won't Consider Hush-Money Probe Again This
The Manhattan grand jury investigating Donald Trump's role in
paying hush money to a porn star has concluded its work for the
week, according to people familiar with the matter, making the
timing of any potential charges against the former president
The grand jury isn't expected to meet Wednesday, when it has
often heard Trump-related evidence, and any work the panel does on
Thursday is expected to be on other cases, the people said. It
isn't clear whether grand jurors will consider the Trump matter
next week, according to the people.
Jamie Dimon to Face Questioning in Lawsuit Over JPMorgan's
Jamie Dimon will be questioned in a civil lawsuit over JPMorgan
Chase & Co.'s relationship with Jeffrey Epstein, people
familiar with the matter said.
The U.S. Virgin Islands sued JPMorgan late last year, saying the
bank facilitated Esptein's alleged sex trafficking and abuse by
allowing him to remain a client and helping him send money to the
late financier's victims.
Taiwan President's U.S. Trip Touches a Flashpoint in U.S.-China
The U.S. and China have described Taiwan as the most volatile
flashpoint in their increasingly fraught bilateral relations.
Now, after months of sparring by Washington and Beijing over the
Ukraine war, a suspected surveillance balloon, TikTok and other
issues, Taiwan is set to return to the center of great power
tensions, with the island's leader traveling to the U.S.
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(END) Dow Jones Newswires
March 29, 2023 05:53 ET (09:53 GMT)
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