Stocks in Europe held solid gains on Wednesday with sentiment
buoyed by hopes that China could backtrack on its zero Covid-19
policy and after data showed the annual rate of inflation in the
eurozone fell in November for the first time since mid-2021.
Commerzbank said the latest CPI print came in at a
lower-than-expected 10%, increasing the likelihood the European
Central Bank will opt for raising interest rates by 50 basis points
at its December meeting.
This would mark a slowdown from the 75bp increases implemented
in the last two meetings. However, it still isn't safe to say that
inflation has passed its peak as high volatility of energy prices
prevent a reliable forecast, Commerzbank said.
Moreover, the core inflation rate--which excludes the more
volatile categories of food and energy--is unlikely to peak until
"The ECB's goal of pushing the inflation rate back to just under
2% on a sustainable basis seems a long way off."
Stocks to Watch
Air Liquide's medium-term growth potential is underpinned by
opportunities in energy transition including its focus on hydrogen,
carbon capture and storage and energy upgrading, Deutsche Bank
said, adding that green growth aims to boost the company's share
Air Liquide is expected to modestly increase its capital
expenditure in the coming years, focusing on investments that are
presold to customers, ensuring its growth remains low-risk,
Deutsche Bank said.
It said Air Liquide has the potential of achieving an estimated
5% compound annual growth rate in sales with earnings per share of
11% between 2023 and 2025.
BASF may continue to face consensus downside risk in 2023, but
its shares shouldn't be too negatively affected, Deutsche Bank
It believes the large majority of downgrades have already been
made and that crucially, most, if not all investors are already
aware of future cuts.
Deutshe Bank's data over the past 30 years show that BASF's
stock inflection point is often during the fastest consensus
"Overall, we see enough upside potential in the name in the
coming 12 months and reiterate our buy recommendation."
Slowing inflation in Spain and Germany is supportive of a
downshift in the pace of the European Central Bank's interest-rate
rise in December, BNP Paribas Markets 360 said.
"While far from being a done deal," the data support BNP's view
that the ECB will slow the pace of the rate rise to 50 basis points
at the December meeting from 75 bps.
"With underlying price pressures remaining elevated, however, we
continue to expect the ECB to keep hiking until policy rates are
well into restrictive territory," BNP said, forecasting the deposit
rate--currently at 1.50%--peaking at 3% by the end of the first
quarter of 2023.
Read ECB's Terminal Rate Could Be Above 3%, Higher Than Market
Read Eurozone Inflation Expected to Fall in November
Stock futures were a touch firmer as traders looked ahead to
Jerome Powell's speech and awaited a big batch of important
economic data during the rest of the week.
The data docket on Wednesday for the Fed's perusal includes the
November ADP employment report, real GDP data, the November Chicago
PMI report, pending home sales for October and the Fed's Beige
One of the Fed's most closely watched inflation gauges, the
personal consumption expenditures index, will be published on
Thursday, followed on Friday by the nonfarm payrolls report.
Eurozone inflation data for November are expected to show an
easing in price pressures but this is unlikely to materially move
the euro, ING said.
"The impact of the inflation story on the EUR/USD has been,
predictably, limited. External factors and dollar dynamics continue
to drive the pair's performance, and we see downside risks today
given that Jerome Powell is scheduled to speak later [1800
A fall in EUR/USD below 1.0300 could fuel more downside
momentum, taking the pair to the 1.0200-1.0250 levels seen earlier
this week, ING said.
The dollar has been under less selling pressure lately, but U.S.
ADP jobs data and a speech by Jerome Powell could leave it
vulnerable to further weakness, UniCredit Research said.
Investors "could return to selling the U.S. unit" if ADP data
show an additional deceleration in U.S. net job creation.
More critically, when Powell discusses the economic outlook and
the U.S. labor market later, any hints of the Fed slowing the pace
of rate rises might prove negative for the dollar, although
month-end position adjustments could help offset this, UniCredit
Read Dollar Heads For Biggest Monthly Loss Since 2010
German 10-year Bund yields are expected to trade range-bound in
the first quarter of 2023 before falling to 1.70% in the second to
third quarter, Mizuho said, maintaining its end-2022 target of
The flattening of the bond curve is more likely to be sustained
in Germany than in the U.S., Mizuho said, as it sees a high
likelihood of a recession.
"In the near-term, even on a downside inflation miss, we don't
sense that this would necessarily be the trigger for a large
Oil prices held minor gains in early European trading, helped by
a drawdown in U.S. crude stockpiles, but any rise for now has been
tapered by the expectation OPEC+ will keep production flat at its
meeting on Sunday.
Base metals were under pressure, while gold gained, as investors
continued to weigh China's Covid-19 rules and any possible shifts
in U.S. monetary policy.
Investors in Asia were weighing "Covid-zero evolutions in China
ahead of a much-anticipated speech from Jerome Powell," according
to SPI Asset Management.
Gold, which is up 7% this month, "looks headed for its biggest
monthly gain since May 2021 after the latest U.S. CPI reading sent
dollar bulls cowering for cover," SPI added.
DOW JONES NEWSPLUS
Eurozone Inflation Eased in November, but Further Rate Rises
The annual rate of inflation in the eurozone fell in November
for the first time since mid-2021 as energy prices dropped.
However, the slowdown isn't likely to stop the European Central
Bank from increasing interest rates further, economists warned.
Consumer-price inflation across the 19 countries that share the
euro has increased since Russia's invasion of Ukraine, and the
Kremlin's decision to weaponize the country's vast stores of energy
to undermine European support for Kyiv.
OPEC+ Leans Toward Maintaining Flat Production, Delegates
OPEC and other big oil producers are likely to decide to keep
output levels flat at their meeting Sunday, the group's delegates
said, amid mounting concerns over returning Covid-related lockdowns
in China and lingering uncertainty over Russia's ability to
The 13-member Organization of the Petroleum Exporting Countries
and a separate group of producers led by Russia-collectively as
OPEC+-are leaning toward approving the same production levels
agreed to in October, when they greenlighted a 2 million barrels a
day output cut, the delegates said. Sunday's meeting was planned to
take place in person at OPEC's headquarters in Vienna, but it will
now be held remotely to avoid negative media scrutiny, the
Rio Tinto Expects Steady Iron-Ore Shipments in 2023
Rio Tinto PLC said it expects iron-ore shipments from its
Australian mines to be steady year over year in 2023, and for
aluminum output to rise.
The world's largest iron-ore producer on Wednesday said it
expects to ship between 320 million metric tons and 335 million
metric tons of the steelmaking ingredient next year. It reiterated
guidance for exports at the low end of the same range in 2022.
SAS 4Q Net Loss Widened on Jet Fuel Costs, Currency Effects
SAS AB on Wednesday reported a widened net loss in its fiscal
fourth quarter as jet-fuel prices and foreign-exchange effects
weighed, and said it is cautious about the winter season due to
prevailing global uncertainty.
The Scandinavian airline reported a net loss of 1.24 billion
Swedish kronor ($117.2 million) in the fiscal fourth quarter to
Oct. 31 compared with a loss of SEK744 million a year earlier as
revenue rose to SEK10.65 billion from SEK5.76 billion.
Hennes & Mauritz to Book 4Q Restructuring Charge of Around
Sweden's Hennes & Mauritz AB said Wednesday that it expects
to book a restructuring charge of just over 800 million Swedish
kronor ($75.6 million) in the fourth quarter related to its
The fashion retailer has previously outlined plans to reduce
annual administrative and overhead costs by around SEK2 billion in
a move that will see the loss of 1,500 jobs.
Ukraine's Power Shortages Force Millions of Refugees Into
Russia's attacks on Ukraine's civilian infrastructure are
forcing millions of Ukrainian refugees who intended to return home
to stay put, prolonging their ordeal and straining Europe's ability
to absorb one of the biggest flows of migrants in decades.
Moscow's repeated strikes on power stations and heating
equipment have caused rolling blackouts in Ukraine and deprived
millions across the country of power, heating and running water
amid subzero temperature. As it struggles to keep the lights on,
Kyiv is now urging Ukrainian refugees to stay where they are for
Ukraine War's Economic Ripples Sow Discord Between Washington,
WASHINGTON-Trans-Atlantic ties are starting to fray as French
President Emmanuel Macron and other European leaders chafe at new
U.S. policies they say compound economic woes fueled by the war in
Ukraine and the resulting energy crisis.
Russia's war in Ukraine has reinvigorated the North Atlantic
Treaty Organization and ignited a boom in trade and investment
between the U.S. and Europe. But after nearly a year of unity as
the U.S. and its allies confronted the fallout from Russian
President Vladimir Putin's invasion of Ukraine, European officials
are starting to express frustration at their increasing reliance on
Washington for security and economic stability.
Powell Will Offer a New Mantra: Slow and Steady
Federal Reserve Chairman Jerome Powell will have an opportunity
on Wednesday to lay the groundwork for where the central bank is
headed when policy makers meet next month-and he'll likely use it
to make the case for slower but steady interest rate hikes.
In a speech Wednesday afternoon at the Brookings Institution,
Powell is expected to reinforce the dual message central bank
officials have been making for weeks: that the Fed is on track to
ease up slightly on its pace of monetary policy tightening, likely
slowing to a 50 basis point increase next month after four straight
75 basis point hikes.
U.S. Not Seeking Decoupling From China, Commerce Chief Says
WASHINGTON-The U.S. isn't seeking to decouple from China, U.S.
Commerce Secretary Gina Raimondo will assert Wednesday, even as she
emphasizes steps the U.S. is taking to safeguard its technology to
ensure its economic competitiveness.
Ms. Raimondo is scheduled to speak Wednesday on U.S. competition
with China at the Massachusetts Institute of Technology. At a
briefing with reporters in advance, Ms. Raimondo highlighted the
importance of promoting trade and investment in areas outside of
core economic and national security interests.
Junk Bonds Rally as Investors Speculate Inflation Has Peaked
Investors are driving a modest end-of-year rally in junk bonds,
erasing some of 2022's biting losses in a bet that the economic
outlook for next year has stabilized.
Yields on below-investment-grade corporate bonds tracked by
Intercontinental Exchange's index have declined to 8.76% through
Monday's trading, down from a recent high of 9.61% on Oct. 13.
Investors say they are growing more confident that interest rates
might peak without putting many lower-rated companies' ability to
repay debt in serious jeopardy.
Biden Administration Pressed by Allied Nations to Revise EV
WASHINGTON-The Biden administration finds itself caught between
its domestic-policy goals and some of its closest allies as it
races against the clock to set the ground rules for new
The Treasury Department's Internal Revenue Service faces a
year-end deadline to propose a guideline for how to qualify for EV
tax incentives of up to $7,500 per vehicle under the tax and
climate spending legislation known as the Inflation Reduction Act
that President Biden signed in August.
Covid Controls Hit Chinese Factories, Adding Risks to Global
SINGAPORE-Economic activity in China contracted further in
November, adding pressure to a global economy already losing
momentum as the war in Ukraine drags on and central banks raise
interest rates to combat high inflation.
Gauges of activity in Chinese manufacturing, services and
construction deteriorated by more than expected this month, a sign
of weakening economic output as authorities persist in using
widespread curbs on business and daily life to respond to Covid-19
China Officials Soften Tone on Covid Curbs Amid Protests
Chinese health officials softened their messaging on the risks
of Covid-19, urging local governments to avoid unnecessary and
lengthy lockdowns, after protesters across the country denounced
the strict controls.
The Omicron variant has caused fewer deaths and less severe
sickness than previous Covid variants, a health official said at a
press conference Tuesday.
India's Central Bank to Launch Retail Pilot of Digital Rupee
India's central bank will launch its first pilot of a digital
rupee for individual users on Thursday, putting it ahead of many
major economies in the journey toward a sovereign virtual
The Reserve Bank of India has said a digital rupee could provide
Indians a safe alternative to risky private digital currencies.
Elon Musk's Neuralink Set to 'Show and Tell' Latest
Brain-Computer Advances at Event
Elon Musk's neuroscience startup Neuralink Corp. is expected to
give a progress report on its brain-implant technology in a highly
anticipated streamed event Wednesday night.
In a tweet last week, the company teased a demo for the event,
which begins at 9 p.m. New York time, with a short video that
slowly spelled out the message "please join us for a show and
tell." Some outside researchers said the video may indicate that a
Neuralink device has been used to decode brain signals to type
words on a screen, although they speculated that it would most
likely be through a monkey or a wearable device.
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(END) Dow Jones Newswires
November 30, 2022 06:18 ET (11:18 GMT)
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