European stocks edged higher in a cautious opening session, as
traders weighed worries over China's debt burden against
encouraging comments by a European Central Bank board member.
Isabel Schnabel declined to rule out interest-rate cuts next
year in an interview published earlier Tuesday. Her remarks helped
to further cement market odds the ECB will cut rates next year, to
69% in March and 90% in April.
Capping gains for stocks was that Moody's cut its outlook on the
China's credit rating to negative. It said financial lifelines
extended by the government to distressed regions and companies were
harming the economy.
Shares on the Move
Barclays fell sharply following media reports that the Qatar
Investment Authority was cutting its stake in the British bank.
"It's certainly not helpful when one of the largest shareholders
is selling stock ahead of the forthcoming strategy update and so
soon after some of the high level proposals for this were mooted in
the press," Shore Capital said.
The lender's stock--which opened 4.7% lower before paring
losses--was a drag on London's FTSE 100, Interactive Investor
Stock to Watch
Europe's major carmakers are set to post significantly lower
EBIT figures in 2024, dropping an average of 19%, UBS said.
It expects flat global sales volumes due to intense competition
and lower affordability, and has a negative view on price and
mix.High production costs are also a factor.
UBS projects that BMW's EBIT will decline most--by 26% to
EUR12.85 billion, from an estimated EUR17.33 billion in 2023.
Mercedes-Benz, Volkswagen, Renault and Stellantis will each see
EBIT fall between 18% and 24%, UBS added.
Porsche, however, could see EBIT growth of 7% thanks to high
prices and a positive mix from new models, UBS said. On aggregate,
UBS said its 2024 estimates are around 15%-20% below consensus.
Futures pointed to minor losses for U.S. stock indexes, while
government bonds rose in price.
Up ahead, investors will parse monthly gauges of U.S. services
from ISM and S&P Global, and the JOLTS report on job
The Atlanta Fed's real-time forecast for GDP growth this quarter
stands at 1.2%, which would be the slowest pace since the second
quarter of 2022, Deutsche Bank noted.
The dollar should recover this week as its recent correction
lower looks to have gone too far, TD Securities said.
Positioning and short-term valuations are stretched, increasing
the risk that the dollar rallies if Friday's nonfarm payrolls data
are strong, TD Securities said. It also upgraded its view on the
dollar until year-end and now expects EUR/USD to finish the year at
The front-end of the eurozone government bond yield curve
remains bid-implying investor demand-shrugging off a slowdown in
expectations of U.S. rate cut hopes, Commerzbank Research said.
"With today's U.S. ISM expected to stabilise, the jury remains
out for how long the eurozone front-end can decouple from the
consolidation in U.S. space," Commerzbank said.
Hargreaves Lansdown said big downward moves in bond yields
aren't imminent but there is scope for lower yields further out,
with higher volatility along the way.
"Investors should not be put off by this outlook-we think this
could the most interesting entry point for bond investors in
decades," Hargreaves Lansdown said.
There is potential that investors could be rewarded either with
income from higher-for-longer yields, or growth, as yields
"Volatility is hard to stomach but can offer opportunities for
good quality active fund managers to take advantage of price
Oil futures were close to 1% higher amid demand concerns, market
skepticism following OPEC+ output cuts and tensions in the Middle
Prices declined on Monday after OPEC+'s voluntary curbs
announcement left traders disappointed, raising questions over
compliance and future supply policy.
Meanwhile, the Israel-Hamas conflict and a series of attacks in
Middle-Eastern waters fueled supply concerns, and falling U.S.
factory orders in October contributed to investor fears of a
broader economic slowdown.
Capital Economics said crude prices should decline by the end of
next year as a result of less constrained global supply and modest
It assumes OPEC+ production will gradually rise starting from
April, likely driving supply growth at a time of only moderate
growth in demand.
"We think that the oil market will be in a slight deficit on
average over most of 2024 but with a surplus in the final quarter,"
Capital Economics said.
It has forecast Brent at $75 a barrel and WTI at $70 a barrel by
the end of 2024, from previous expectations of $85 a barrel and $80
a barrel, respectively.
Base metals were weaker on worries about the economy and demand
for industrial goods, while gold edged up.
"The macroeconomic environment is on the bearish side of the
ledger," according to Peak Trading Research, citing weakness in
crude oil and commodity currencies like the Australian dollar and
Peak added that markets will be looking to Friday's nonfarm
payrolls in the U.S. and in turn how they could affect Federal
Reserve policy, though said it's unlikely the Fed will hike rates
AT&T Drops Nokia for Ericsson in $14 Billion Deal
AT&T struck a deal with Ericsson to buy up to $14 billion of
its hardware and services after the Swedish equipment supplier
pledged to open up its software to competing systems.
The five-year agreement would move virtually all of AT&T's
new purchases of certain cell-tower equipment to Ericsson,
replacing existing machinery from Finnish rival Nokia in many
markets. The Dallas-based telecom giant said it plans to start the
swap next year and aims to have 70% of its wireless network traffic
passing through open platforms by late 2026.
French Industry Continued Its Slump in October
French industrial production sank again in October, defying
expectations for a slight rebound and adding to signs of a cooldown
across the eurozone.
Total production across French industry decreased by 0.3%
compared with the previous month, according to figures set out
Tuesday by national statistics body Insee. In September, production
dropped 0.6%, Insee said, revising down a previous estimate for a
UK Retail Sales Remained Weak in November Despite Black Friday
Retail sales growth in the U.K. remained weak in November
despite a boost from Black Friday, with the cost-of-living crisis
continuing to squeeze household budgets, according to the latest
British Retail Consortium data published on Tuesday.
Total retail sales for the four weeks to Nov. 25 increased by
2.7% compared with the prior month, when it saw growth of 2.5%, the
BRC-KPMG Retail Sales Monitor report said. This was above the
three-month average growth of 2.6%, but compares with 4.2% growth
in November last year.
Telefonica Proposes Workforce Restructuring for 5,124 Jobs in
Telefonica proposed a workforce restructuring plan that will
affect 5,124 jobs in Spain as part of its reorganization.
The Spanish telecommunications company on Monday told unions
that it aims to implement a labor force adjustment plan by 2026,
due to organizational, technical and production needs, a
spokesperson from trade union UGT told Dow Jones Newswires.
Brenntag Updates Mid-Term Targets, to Reorganize Divisions
Brenntag updated its mid-term financial targets and unveiled
strategic steps to create divisional independence within the
The German chemical distributor said Tuesday that the strategy,
presented at a Capital Markets Day in London, contains the
operational and legal disentanglement of Brenntag Essentials and
Brenntag Specialties, creating two distinct divisions with full
autonomy. As a result of this product portfolio shift, Brenntag
Group now expects an organic gross profit growth of between 4% to
7%, an Ebita margin growth of 7% to 9% and a conversion ratio of
35% to 37% annually by 2027, it said.
China's Colossal Hidden-Debt Problem Is Coming to a Head
China is trying to defuse a financial time bomb that could
severely damage its banking system.
Cities and provinces across the country have accumulated a
massive amount of hidden debt following years of unchecked
borrowing and spending. The International Monetary Fund and Wall
Street banks estimate that the total outstanding off-balance-sheet
government debt is around $7 trillion to $11 trillion. That
includes corporate bonds issued by thousands of so-called
local-government financing vehicles, which borrowed money to build
roads, bridges and other infrastructure, or to fund other
Moody's puts negative outlook on China's debt on expectations of
regional government bailout
Moody's Investors Service on Tuesday cut the outlook on China's
debt to negative from stable citing expectations that the national
government will have to step in to rescue regional and local
Moody's kept China's long-term rating at A1.
China's November Caixin Services PMI Rose to Three-Month
A private gauge of China's services activities rose to a
three-month high in November, contrasting with an official index
that tumbled into contraction.
The Caixin services purchasing managers index climbed to 51.5 in
November from 50.4 in October, Caixin Media Co. and S&P Global
said Tuesday. A reading above the 50 mark suggests activity
expansion, while one below that level indicates contraction.
Green Investors Were Crushed. Now It's Time to Make Money.
Invest according to your political views, and you're unlikely to
make money. Companies that appeal to left-wingers or to
right-wingers might be good or bad investments, but the fact of
being, on current politics, clean and union-friendly for the left
or oily and gun-friendly for the right is neither here nor there.
What matters is their ability to make money and how highly they are
This has been rammed home for environmentally-minded investors
in the past year, as a coordinated selloff in anything with green
credentials crushed the idea of making money while doing good.
Israel, Hamas Engage in Some of Fiercest Fighting of War
TEL AVIV-Israel and Hamas are locked in some of their fiercest
fighting of the two-month-old war, including at close quarters, as
Israel launched its offensive in the south while trying to finish
its operations in and around Gaza City.
The Israeli military has essentially cornered Hamas fighters in
two of their last strongholds in the northern Gaza Strip-the
Shajaiya neighborhood of Gaza City and the city of Jabalia,
immediately to the north.
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(END) Dow Jones Newswires
December 05, 2023 05:37 ET (10:37 GMT)
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