EMEA Morning Briefing: Stock futures up ahead of busy data week

MARKET SUMMARIES

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Germany’s Balance of Payments; Hanover Trade Update

Opening Conversation:

Stock futures rose early Monday ahead of a busy data week. Asian stock indexes rose; the dollar stabilized; oil futures rose; while gold fell.

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European stock futures rose on Monday morning as investors prepared for the release of new economic data, including the U.S. CPI and Chinese retail sales.

“Financial markets have stabilized for a while after concerns about the risk of a hard landing triggered a brief Wile E. Coyote moment,” BofA Global Research said. “From there, the data will have to tell us what kind of economy we have: one that is gradually slowing down or one that is slowing down rapidly.”

Like all major economic releases, the US CPI data can have a major impact on markets and the Federal Reserve, but investors will be paying more attention to it this time around amid concerns that any signs of an economic slowdown and insufficient inflation could send stocks lower.

Upcoming earnings reports from major U.S. retailers like Walmart and Home Depot, due out this week, will be closely scrutinized for additional evidence about the state of the American consumer.

Currencies:

Investors are focused on July U.S. CPI data due on Wednesday. The dollar is expected to trade mixed but with a bias to weakness this week, the Commonwealth Bank of Australia said. Markets are likely to “double down” on a big Fed rate cut this year if core CPI rises by 0.1% or less on the month, the CBA said.

Bonds:

LBBW forecasts that the European credit market will likely face greater volatility in the coming weeks due to growing concerns about the economic slowdown and seasonal factors such as low liquidity in the summer.

“Since high-yield bonds in particular tend to track stock markets in times of volatility, we believe that further fluctuations in credit are also possible in the near future,” LBBW said. August and September are often difficult months for risk assets such as equities and credits, he noted.

Energy:

Oil futures rose Monday morning as traders assessed divergent signals. Escalating tensions in the Middle East could lead to disruptions in oil supplies.

Meanwhile, concerns about the health of the global economy are growing, said BMI, a Fitch Solutions subsidiary. BMI is maintaining its current forecast for Brent crude to average $85/bbl in 2024 and $82/bbl in 2025, while acknowledging significant downside risks.

Metals:

Although markets have regained some stability in recent sessions, volatility in global financial markets may persist, said Rania Gule, senior market analyst at XS.com. The analyst said it could be a good time to bolster gold investments, thanks to its appeal as a safe-haven asset for the precious metal.

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Macquarie cut its copper price forecasts by 4.9% for 2024, 4.2% for 2025 and 2.4% for 2026 on expectations of weaker demand and lowered its targets for some producers of the industrial metal. Pure copper producers are among the hardest hit, Macquarie added.

TODAY’S TOP HEADLINES

Markets could recover. Investor nerves could not.

Many investors and market watchers have concluded that last Monday’s market crash was merely a formality, albeit a worrying one, that the economy is doing well and that the day’s chaos can be forgotten now that the panic has subsided.

I disagree. The fear we saw on Monday tells us something about where markets are headed and how investors are feeling. It could also directly impact investor psychology, influencing whether the cracks we just saw in markets turn into chasms.

Why US stocks face a bumpy road to recovery with inflation and earnings updates on the horizon

Wall Street is increasingly nervous about the health of the U.S. economy. American households are also feeling the strain, and if that’s proven in this week’s economic and earnings reports, it could derail a stock market rebound from its worst day in two years.

U.S. stocks on Friday ended a tumultuous week after an unwinding of a carry trade fueled by the Japanese yen and fears of a weakening U.S. economy rocked global financial markets. All the major indexes ended the week just shy of fully reversing their weekly losses.

China’s Nightmare: Trump’s Second Trade War

SINGAPORE—China was battered by President Donald Trump’s trade war with the United States but eventually bounced back. If Trump wins the White House in November, the second round will be much tougher.

The Republican candidate has said he would raise tariffs on Chinese imports to 60% or more if he wins this year’s presidential election. The economic damage to China would be much greater than in Trump’s first term because the tariffs would be higher and China’s economy is much more vulnerable.

The bond market is showing signs of taking risks. Investors are not cowed.

The bond market is showing signs of increased risk-taking.

Investors have moved away from the safety of Treasury bonds, backed by the nearly spotless history of the U.S. government, and have begun to favor corporate bonds, which are riskier.

It’s been a wild week for stocks. Hold on tight and stay calm as we await inflation data.

So much for August being a quiet month for markets. A dramatic sell-off on Monday kicked off a week of chaos, but ahead of next week’s inflation data, investors who stay calm will likely be rewarded.

Stocks fluctuated wildly as the Bank of Japan’s aggressive interest rate move exposed a carry trade trend, where people borrowed yen at a low price and then used it to invest in higher-yielding assets.

As Ukrainian forces take over Russian territory, Kremlin says it’s no big deal

In the five days since Ukrainian forces entered Russia’s Kursk region, at least 76,000 Russian civilians have fled the fighting – some spotted fleeing in shrapnel-covered cars. A tent city for refugees is being set up in the regional capital.

The first major foreign military invasion of Russian territory since World War II, the Ukrainian invasion caught Moscow by surprise. Kiev’s forces advanced at least 20 miles from the border and raised the Ukrainian flag in the city of Sudzha.

On the Brink of a Wider War, the Middle East Finds Common Ground in Humor

Just a few days ago, Diana Hillel was convinced she would be stuck in her Tel Aviv home for the better part of a month, making sure her two children were safe from attack by Israel’s regional enemies. But by Friday, the 34-year-old makeup artist was tired of worrying.

More than a week after Iran threatened retaliatory attacks on Israel, nothing had happened. She grabbed a few friends and headed to a beach bar, where they laughed about a week spent needlessly paralyzed by fear.

Uber CEO is skeptical about Elon Musk’s Robotaxi idea

Uber Technologies CEO Dara Khosrowshahi isn’t sure parts of Elon Musk’s robotaxi strategy make sense. If he’s wrong, Uber has a problem.

Tesla believes it is on the cusp of fully autonomous cars, opening up the potential for a robotaxi business that could revolutionize personal transportation as well as Uber’s ride-hailing business.

How Elon Musk Uses His Empire to Launch xAI

Elon Musk has big plans for his xAI startup. A key part: leveraging his other companies.

The billionaire has been betting on artificial intelligence for years, leveraging talent, data and equipment from his other businesses to help him develop what he says will be the world’s most powerful AI by December.

Intel: Too Big to Change, Too Important to Fail

Chips are down like never before for Intel. But in 2024, even the much-shrinked semiconductor maker could be too big to fail.

Intel’s disastrous second-quarter earnings report this month put the struggling chipmaker in a whole new light—and not in a good way. Falling sales in key markets and rising costs from an ambitious production shakeup have forced the company to take more drastic steps to conserve cash. They include laying off 15% of its workforce, cutting capital expenditures to build and equip manufacturing plants, and suspending a dividend Intel has paid since 1992.

Technicians Bet They Can Help Win War With China

Palmer Luckey was a Facebook executive when he first talked to venture capitalist Trae Stephens about starting a weapons company. “I’m actually building a ramjet in my pool,” Luckey told Stephens over lunch, referring to a type of engine designed to power high-speed missiles and airplanes.

About a year and a half after that conversation, Luckey left Facebook, which allowed him to start a defense company with Stephens, in which the venture capital firm Founders Fund became a lead investor.

Why No Big Tech Company Has Been Able to Dethrone Nvidia as the King of AI

Nvidia is famous for building AI chips, but its most important construct is the business barrier that keeps customers in and competitors out. That barrier is made of software as much as silicon.

Over the past two decades, Nvidia has created what’s known in tech as a “walled garden,” not dissimilar to the one Apple has created. While Apple’s ecosystem of software and services is aimed at consumers, Nvidia has long focused on developers who build AI systems and other software with its chips.

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Important events expected on Monday

05:00/FIN: June balance of payments

06:00/DEN: July CPI

06:00/ROM: July CPI

06:00/GER: July WPI

07:00/TUR: Jun Employment / Unemployment

07:00/JUN: July CPI

07:00/CZE: Import and export price indices in June

07:00/SVK: June Employment and average monthly wages in selected industries

07:00/SVK: Turnover in selected sectors of the economy, including industry and construction in June

08:00/EU: July Long-term interest rate statistics

08:00/BUL: May trade with EU member states – preliminary data

08:00/BUL: June trade with third countries – preliminary data

10:00/POR: July CPI

15:59/UKR: July CPI

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August 12, 2024, 00:16 ET (04:16 GMT)