XM does not provide services to residents of the United States of America.

A reality check for markets



<html xmlns="http://www.w3.org/1999/xhtml"><head><title>LIVE MARKETS-A reality check for markets</title></head><body>

STOXX Europe 600 up 0.9%

Euro zone inflation drops

Oil stocks lead gainers

U.S. stock futures tick up

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com


A REALITY CHECK FOR MARKETS (0924 GMT)

With banking woes on the back burner, and a last minute deal struck to resolve the U.S. debt ceiling debacle, markets have entered a new month on a resilient note.

But Thomas Hempell, head of macro and market research at Generali Investments Europe, is telling investors to "mind the widening gaps" when it comes to global equities.

Markets might feel emboldened by hot labour markets and pent-up post-pandemic demand, he says, but global manufacturing PMIs are signalling stagnation, and the gap with services PMIs is at its widest since at least the global financial crisis.

"Most importantly, the sharpest tightening of monetary policy since the 1980s is still to unfold. Don't be lured by still robust US activity. Recession is looming for the coming quarters".

China's reopening "has disappointed before it even started", he adds, and global trade is in the doldrums.

While headline inflation is set to recede on base effects and lower energy prices, underlying price pressure will keep major central banks on a restrictive policy path for longer.

"A Fed pivot is not on the cards before Q4 and not before mid-2024 for the ECB," writes Hempell.

He highlights the divergence between the inverted yield curve, signalling recession, and HY and equity markets which seem to disagree on timing.

And it is those two parts of the market that he views as the most vulnerable.

Upcoming suffering for earnings, and currently dear valuations, point to more pain ahead.


(Lucy Raitano)

*****

STOXX BOUNCES BACK (0808 GMT)

European shares rose on Thursday with comments from Fed officials pointing to a rate hike "skip" in June fuelling a bounce back across risky assets and helping the STOXX Europe 600 .STOXX recover most of Wednesday's losses.

The region-wide European equity benchmark was up 0.7% from two-month lows hit on Wednesday. Eyes in less than one hour will be on the euro area May flash inflation reading which is expected to show a continued easing of price pressures.

The rebound saw most sectors rise, while real estate, utilities and telecoms weakened. Oil stocks .SXEP led the bounce, up 1.3% as crude prices rose, helped by the potential pause in U.S. rate increases.

(Danilo Masoni)

*****


EUROPEAN SHARES SEEN RISING AHEAD OF INFLATION DATA (0645 GMT)

European shares were set to kick off the new month on a positive footing ahead of euro area inflation numbers for May that could shows more signs of easing price pressures and shape expectations for the likely path of monetary policy.

EuroSTOXX50 futures rose 0.8% and those on commodity heavy FTSE added 0.2% after losses on Wednesday that drove the region-wide STOXX Europe 600 to end May at two-month lows. S&P 500 futures steadied following a weak close on Wall Street.

In the corporate world, the news flow was thinning out, as earnings season winds down. There were still some quarterly reports for investors to look at.

French spirits group Remy Cointreau RCOP.PA reported a higher-than-expected rise in operating profit for its fiscal year and stuck to its cautious prospects for this year.

Slowing revenue growth at Salesforce could weigh on shares at German software maker SAP SAPG.DE, while fashion retailer Hugo Boss BOSSn.DE could get some support from a surprise quarterly profit from U.S. department store chain Nordstrom.

Eyes also on Infineon IFXGn.DE, which said it was looking for acquisitions worth up to 3 billion euros. Minor acquisition for Lonza LONN.S which agreed to buy Synaffix for up to 160 million euros ($176.13 million). In the UK, autocatalyst maker Johnson Matthey JMAT.L is planning to sell its medical device components business, according to Bloomberg.


(Danilo Masoni)

*****



PLOTTING POLICY PATHS FOR EUROPE AND THE US (0554 GMT)

It's a volatile time for central bank watchers, when comments from one man can flip the script in a moment.

Of course, the man responsible for the latest twist is a closely followed Fed governor and vice chair nominee, Philip Jefferson, but still, his comments led bets on the next Fed policy move on June 14 to retreat from a 70% chance for a quarter-point increase to just 38% at latest check.

Jefferson said he favoured "skipping" a rate hike at the upcoming meeting and that term has started to displace "pause" among Fed officials. Some Fed watchers believe this conveys a slightly more hawkish nuance.

Bets for ECB tightening have been knocked back, too, most recently by weaker-than-expected CPI data from Germany and France. That puts the spotlight on the euro-area preliminary CPI reading for May, due later in the day, which now seems likely to come in below forecasts.

The euro zone's central bank will also release the summary of its meeting a month ago, when rates went up by a quarter point, and there will be fresh comments from ECB chief Christine Lagarde, who speaks at a banking conference in Hanover.

Traders currently foresee slightly more than 50 basis points of ECB tightening left before an expected peak in January.

Among a sizeable smattering of other European data in the day ahead are factory PMIs from the euro zone and many of its biggest members, including Germany and France, as well as from Britain and the United States.

In a positive prologue to those, Chinese factory activity posted a surprise swing to growth last month. Japan's reading also rebounded.

Investors seemed to be in a good mood across most of Asia, pushing stocks higher with encouragement from those more dovish Fed bets and relief at the U.S. House of Representatives passing a bill to suspend the debt ceiling - and avert a catastrophic default - with a big bipartisan majority. That's a strong indication that the bill could get through the Senate before the weekend.


Key developments that could influence markets on Thursday:

German retail sales

UK house prices and mortgage lending

Euro zone, Spain, Italy, France, Germany, UK and U.S. manufacturing PMIs

Italy and euro zone unemployment rate

U.S. ADP jobs report and weekly jobless claims

U.S. ISM manufacturing


(Kevin Buckland)

*****



($1 = 0.9084 euros)


ECB eases the pace of interest rate hikes https://tmsnrt.rs/3NzdjqE

Powell's policy sprint https://tmsnrt.rs/3qQdxgq

eu open https://tmsnrt.rs/43vXpC2

</body></html>

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.