European equities were around 1% lower on Wednesday, faltering
after a three-day winning streak.
While the "Fed pivot" narrative received a lot of attention on
Tuesday, many analysts said the move higher in equities was more
likely the result shares had fallen to oversold levels, since
nothing has fundamentally changed to warrant a major pivot from the
"It mainly looked to me like short-covering once again. We seem
to see these types of moves pretty often, and maybe it turns into
something, but I doubt it," said Mott Capital Management.
Read: Barrons.com: Europe Should Brace for Surprises. A New Debt
Crisis Probably Isn't One of Them.
Stocks to Watch:
The head of Infineon's automotive division confirmed that demand
for microcontrollers and power semiconductors remains well ahead of
the chip maker's capacity to supply, with no order cancellations,
meaning it's in a position to provide guidance for the 2023 fiscal
year above current consensus, Citi said.
"We expect Infineon to sound consistently bullish on demand in
both automotive and industrial end markets, to provide FY23
guidance above current consensus, and to raise its through-cycle
revenue growth and margin targets."
Infineon's guidance should exceed current consensus of 6%
revenue growth and 22% margins.
LVMH's core soft-luxury division could help the group beat
expectations when it sets out results next week, RBC Capital
Markets said, maintaining its outperform rating on the stock and
nudging up the target price to EUR715.
The division, which houses Louis Vuitton and Dior, should post
some 20% sales growth at constant currency, ahead of consensus
expectations, RBC said. While the division has a high bar to clear,
regional trends in the segment have remained broadly favorable. On
the other hand, the wines & spirits and hard-luxury business
could miss expectations, RBC added.
Stock futures edged lower, as investors paused for breath after
major indexes marked a second consecutive day of strong increases
to open the fourth quarter.
Stocks extended their gains on Tuesday as economic data showed
U.S. job openings fell sharply in August, touching the lowest level
since last fall.
The data suggested that the red-hot labor market might be
cooling off a bit as interest rates rise and the economy slows,
marking the latest example of the "bad news is good news" dynamic
that has occasionally manifested in recent weeks.
Investors will hear more about the labor market on Friday, when
the nonfarm payrolls data for September is released. Between now
and then, investors will also receive updates from ADP's private
payrolls report as well as the weekly update on the number of
Americans claiming unemployment benefits.
The euro touched parity against the dollar late on Tuesday, but
ING said there's not enough "bullish push" to keep EUR/USD above
parity on a sustainable basis, as it maintains its forecast of a
drop to the low 0.90 area into year-end.
"It's hard to point to any material change in the eurozone's
outlook that would warrant a significant return of market appetite
for the euro just yet," ING said.
Sterling looks vulnerable given the U.K.'s tarnished fiscal
reputation and after Treasury Chief, Kwasi Kwarteng, pushed back
against reports he would bring forward his debt-cutting plan, ING
"We suspect that the sterling rebound and the dollar correction
may have come far enough and could easily see cable [GBP/USD]
reversing to the 1.1200 area," ING said.
JPMorgan said bonds are oversold, expecting peaking inflation
and inflation expectations, as well as activity weakness to likely
It expects activity momentum to stay weak near term, while
market pricing of a Federal Reserve terminal rate of 4.6% might not
"As activity softens towards contraction, the Fed is likely to
become more data dependent," JPMorgan said.
The fact the Bank of England didn't buy gilts on Tuesday is
"underlining this is a backstop facility only," Citi said.
"The rise in long-end [gilt] yields looks fair and not
disorderly, and not a reason for the BOE to step in, but of course
it will stand ready," Citi said, referring to the fact that
long-dated gilt yields bucked the wider rates rally on Tuesday,
with a re-steepeing of the 10-30-year gilt curve.
Oil prices were little changed, with investors pausing ahead of
an OPEC+ meeting which might see the cartel undertake its biggest
supply cut since the pandemic.
Despite Wednesday's muted moves, oil has jumped this week as the
market has priced in a large cut in OPEC+ oil quotas. Analysts are
girding for a cut of between 500,000 and 1.5 million barrels a day
as the group seeks to halt a slide in crude prices.
"OPEC+ has to convincingly demonstrate its desire to restore
prices to market fundamentals in order to offer meaningful support
for oil benchmarks, amid the wave of demand-destroying policy
tightening by central banks around the world," Exinity Group
Gold and base metals were higher, with prices supported by a
weaker dollar on hopes the Fed will adopt a looser monetary
"Tighter monetary policy has been a strong headwind for base
metals, with concerns demand will falter amid higher borrowing
costs," ANZ Research said.
DOW JONES NEWSPLUS
EU Likely to Approve G-7 Cap on Russian Oil Price in Two
BERLIN-The European Union has advanced work on a price cap for
Russian oil under an approach that keeps the U.S.-led effort on
track, but holds off on final approval.
EU member states are set to agree on a two-stage approach to the
international price cap on Russian oil, which is being developed
within the Group of Seven industrial economies. EU officials are
preparing legislation needed to implement the measure, but will
hold off approving it until the rest of the G-7 is ready, diplomats
and officials said.
Tesco 1H Pretax Profit Fell on Increased Costs; Sees FY 2023 at
Lower End of Guidance Range
Tesco PLC said Wednesday that its pretax profit fell in the
first half of fiscal 2023 on increased costs, and said guidance
will be on the lower end of its forecast range for the full
The U.K.'s biggest grocer by market share made a pretax profit
of 413 million pounds($473.9 million) in the six months ended Aug.
27, down from GBP1.14 billion a year earlier, on increased finance
costs and higher cost of sales.
Germany Trade Surplus Narrowed Sharply in August as Export
Germany's trade surplus narrowed more than expected in August as
exports rose at a slower pace than imports.
The country's balance of exports and imports of goods--was 1.2
billion euros ($1.19 billion) in calendar and seasonally-adjusted
terms in August, narrowing from a EUR3.4 billion surplus in July,
according to data from German statistics office Destatis released
Bang & Olufsen Swung to 1Q Net Loss, Warns of High
Bang & Olufsen AS on Wednesday backed full-year guidance
despite swinging to a fiscal first-quarter net loss and cautioning
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 net loss of 100
million Danish kroner ($13.3 million) for the three months to
August 31. Analysts had expected a net loss of DKK56 million,
according to a FactSet poll.
EU Commission to Support STMicroelectronics New Italy Plant With
The European Commission said Wednesday that it has approved a
tranche of Italy's post-pandemic aid which would support
STMicroelectronics NV in the construction of a semiconductor plant
in Italy with 292.5 million euros ($292.1 million)
The grant will support the company's EUR730 million investment
for the construction of the plant, which is located in Catania, the
Commission said. The establishment will focus on silicon carbide
wafers, which serve as a base for microchips used in electric
vehicles, fast-charging stations and the like.
Container Line Hapag-Lloyd to Buy South American Terminal,
German container shipping line Hapag-Lloyd AG is stepping up its
push into inland logistics with the acquisition of the shipping
terminal and logistics businesses of Chile's Sociedad Matriz SAAM
SA for around $1 billion.
Under the agreement unveiled Tuesday, the German shipping
company will acquire SAAM Ports SA and SAAM Logistics SA, as well
as a real-estate portfolio from Sociedad Matriz. The ports business
comprises terminals in Chile, as well as other countries in South
and Central America and in Florida.
U.K. Regulator Pushed Pensions to Load Up on LDIs
The derivatives-based investment strategy that tipped the U.K.'s
pension sector into crisis started with good intentions: Help
companies fulfill promises they made to employees to pay a steady
income through retirement.
Behind the push into that strategy, say pension trustees and
their advisers, was the Pensions Regulator, the U.K.'s powerful
watchdog, charged with safeguarding the savings of millions of
private-sector workers. The regulator steered private pension funds
to adopt liability-driven investments, known as LDIs, linked to
returns on U.K. government bonds, according to pension trustees and
As Ukrainian Forces Advance, West Plays Down Threat From Russian
Ukrainian forces accelerated their advance into Russian-held
areas of the southern Kherson region as Western officials played
down the likelihood of Russia using nuclear weapons in retaliation
for its military defeats.
Ukrainian troops announced the liberation of several towns,
while Moscow sought to prevent an encirclement of its forces in the
east and south of the country. Soldiers posted footage of
themselves unfurling the Ukrainian flag over Davydiv Brid and
claimed the liberation of Starosillya, Arkhangelskoye and Velyka
Tech Stocks Face New Blow as Strong Dollar Threatens
Technology stocks are having their worst stretch in decades.
Upheaval in the currencies market might make the rout even
Large technology companies generate 58% of their revenue outside
of the U.S.-the highest share of the S&P 500's 11 groups,
according to FactSet. That makes them particularly vulnerable to
fallout from the surging dollar. When the dollar strengthens, sales
that companies earn in nondollar currencies are worth less. That in
turn can shave millions of dollars off company earnings.
Commodity-Trading Hedge Funds Are Having a Strong Year
Some hedge funds that trade raw materials have generated
blockbuster returns this year, making them among the major
beneficiaries of exceptionally volatile commodity markets.
Prices for oil, natural gas, metals and grains ripped higher
earlier this year as economies reopened from lockdown and the
Ukraine war disrupted flows of energy and raw materials.
RBNZ Continues to Raise Rate Sharply to Counter Inflation
The Reserve Bank of New Zealand raised its official cash rate by
a further 50 basis points on Wednesday, citing continued inflation
pressures across the economy.
The hike takes the official rate to 3.50%, and marks the fifth
50-basis-point rise in the current tightening cycle. Most
economists expect the RBNZ will take the cash rate well above 4.0%
before it is satisfied that inflation has been tamed.
Fed Official Says Inflation Fight Will Take Time, Despite Signs
Bringing inflation down from 40-year highs is likely to take
time and will require a slowdown in economic growth and reduced
demand for workers by employers, a Federal Reserve official said
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(END) Dow Jones Newswires
October 05, 2022 05:18 ET (09:18 GMT)
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