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STOXX Europe 600 down 0.1%
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U.S. debt ceiling talks weigh
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Commerzbank drops after results
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Wall Street futures edge higher
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MORE CHINA HEADWINDS FOR MINERS (1115 GMT)
China's reopening may have been a boon for luxury goods makers but its recovery has been all but even. European-listed miners in fact haven't got much out of it mostly, because of ongoing troubles across the real estate sector.
And recent macro data out of the world's No.2 economy highlight the risks for European miners, which makes RBC analysts pretty cautious on the sector going forward.
"Although completions have helped to support activity, new starts have pulled back significantly and are now at the lowest level since 2009. As the under construction inventory fades, there is risk that steel consumption for real estate is materially lower than expectations," they write.
On the positive side, RBC says the sector is largely back to fair value. Yet it anticipates volatility in iron ore prices as markets might turn their hopes to bigger stimulus potentially fuelling a "bad-is-good" dynamic.
That being said, RBC sees risks tilted to the downside.
The "underlying increase in the consumption side of the economy is what policymakers want, which may leave fixed asset stimulus expectations lagging," they say. "Any incremental stimulus will take time to work through, and we fear will not offset the eventual lower construction levels from the lower pipeline of new starts already in the books".
The STOXX Europe 600 Basic Resources is down 13% so far in 2023, a 22 percentage point underperformance relative to the broader market, as you can see in the chart below.
(Danilo Masoni)
DOLLAR BOOST FROM DEBT CEILING JITTERS TO BE SHORT LIVED - UBS (0948 GMT)
Last week, the dollar clocked its best performance since September, adding 1.4% over five days, but UBS strategists still see weakness over the next 6-12 months.
UBS CIO Mark Haefele and his team attribute last week's jump to increased safe-haven demand as investors worry about the approaching deadline to increase the U.S.' debt ceiling. But the boost shouldn't last long, they write in a note.
"While political wranglings over the US borrowing limit have historically generated plenty of headlines, the impact on the US dollar has been fleeting. Currency markets are forward-looking and likely to assume Congress will agree to a last-minute deal."
The UBS strategists also highlight recent hawkish signals from various Fed speakers, a factor that calls into question the market assumption of a pause in rate hikes at the June policy meeting.
Still, they think the Fed is closer to the end of the hiking cycle than the European Central Bank.
"We think the market focus on potential rate cuts in the US toward year-end and in 2024 could intensify in the coming months and will likely push US yields down further."
Falling energy prices are also benefiting the euro.
For all those reasons, they advise investors to hedge their exposure to USD - the least preferred currency in their global strategy.
The most preferred are the Japanese yen and the Australian dollar.
"To hedge against USD downside and rising US recession risks, we continue to recommend buying gold, which we forecast to hit USD 2,200/oz by March 2024," they conclude.
(Lucy Raitano)
COMPANY Q1 CALLS: UPBEAT ON MICRO, DOWNBEAT ON MACRO (0918 GMT)
The reporting season in Europe is drawing to a close and beyond the high beat rates, commentary from corporate executive during analyst calls has also offered a sense of optimism.
An HSBC analysis of call transcripts has found that recession fears are fading. Sentiment towards earnings, revenues and guidance is also improving, which seems to contrast with increasingly gloomy macro forecasts.
So how to solve the macro-micro outlook conundrum?
HSBC believes the gap could close up somewhat in favour of the more upbeat micro views.
"We believe that the divergence between an improving micro outlook, despite a challenging macro-economic scenario, could narrow in the coming quarters. It remains to be seen whether managements are being too optimistic about their own performance in the context of a challenging economic environment, or whether the gloomy outlook is overly pessimistic," it writes.
"Certainly, recent upward revisions to GDP growth forecasts by HSBC and other economists suggest the latter," it concludes.
(Danilo Masoni)
MURKY RESULTS WEIGH ON STOXX (0830 GMT)
The STOXX 600 is down 0.2%, weighed down by a stream of murky corporate results just as investor jitters around the U.S. debt ceiling remain unresolved.
Watches of Switzerland is doing time at the bottom of the index, with shares falling as much as 12.9% after the luxury watch retailer forecast a "modest" sales decline in the first quarter. Shares were last down 6.8%.
Commerzbank is next, down 6.2%. The German lender's hiked full-year net interest income (NII) forecast but that came in below expectations.
London Stock Exchange Group shares are down 4.3% after a discounted share sale by a consortium of investors, who together cashed in about 2.7 billion pounds post-close on Tuesday.
The drop in LSEG shares is contributing to a 1.5% decline in the STOXX financial services index, the worst off sector today.
Real estate is also suffering, down 1.3% with British Land proving a drag after the UK property firm missed market expectations on a key metric gauging the value of its properties.
Healthcare stocks and industrial goods and services are faring better, but even they're only adding about 0.2%.
Netherlands-based biopharmaceutical company Argenx is helping the healthcare index, as shares rise 3.8% on media reports about potential M&A interest.
(Lucy Raitano)
ARE WE THERE YET? MARKETS HOLD BREATH FOR DEBT CEILING DEAL (0651 GMT)
Nervousness in the market over the looming U.S. debt ceiling deadline prevailed through the Asian hours and will remain the main focus for investors as Europe wakes up.
While the talks between U.S. President Joe Biden and top congressional Republican Kevin McCarthy did not end in a deal, they edged closer to an agreement that would avoid what could be a catastrophic U.S. debt default.
McCarthy, the speaker of the House of Representatives, told reporters the two sides remained far apart on an agreement. But he said, "It is possible to get a deal by the end of the week. It's not that difficult to get to an agreement."
Biden, who cut short an Asia trip this week, said, "There is still work to do."
Close but no cigar. Not yet anyway, but a measure of the cost to insure exposure to U.S. government debt declined after the meeting, which the White House described as "productive and direct."
And so the market is in a holding pattern, with MSCI Asia ex-Japan choppy, dollar hovering around a five-week peak and gold just shy of the key $2,000 per ounce mark.
European markets are set for a lower open, with traders waiting for April inflation data for the eurozone.
With a whole host of Fed speakers through the week, expect hawkish rhetoric to keep investors jittery and guessing about what the Federal Reserve is likely to do with interest rates.
Focus will also be on UBS Group AG after the Swiss bank flagged a financial hit of about $17 billion from the takeover of Credit Suisse Group AG.
Meanwhile, Capital One Financial Corp got a lift after billionaire investor Warren Buffett's Berkshire Hathaway Inc disclosed it had taken a stake of nearly $1 billion in the credit cards-focused bank.
BlackRock Inc has asked its staff to return to the office at least four days a week, joining other major financial firms in changing work-from-home policy as financial institutions start to look beyond COVID-19-induced restrictions.
Elsewhere, Tesla Chief Executive Elon Musk on Tuesday said the electric vehicle maker was not immune to global economic conditions, which he said will be difficult for the next 12 months.
Finally, we end with some good news. Japan's economy emerged from recession and grew faster than expected in the first quarter as a post-pandemic consumption rebound offset global headwind.
Key developments that could influence markets on Wednesday:
Economic events: eurozone inflation data for April, France unemployment rate
Earnings: Target, Cisco, Tencent and Siemens
(Ankur Banerjee)
EUROPEAN FUTURES EDGE DOWN AS U.S. DEBT CEILING JITTERS PERSIST (0635 GMT)
European futures are signalling drops at the open, as the mood remains cautious due to U.S. debt ceiling jitters and a murky economic outlook.
Eurostoxx futures are down 0.4% as are FTSE futures , while Germany's DAX futures are escaping heavier losses, down 0.1%. U.S CME e-mini S&P 500 futures are 0.1% higher.
Focus remains on developments around the U.S.'s debt ceiling, with U.S. President Joe Biden cutting short a trip to Asia as officials edge closer to a deal to avoid a looming U.S. debt default.
Tesla Inc CEO Elon Musk warned on Tuesday that the electric-vehicle maker was not immune to the global economy, which he said will be difficult for the next 12 months.
UBS Group AG said it expects a financial hit of about $17 billion from the takeover of Credit Suisse Group AG .
Eyes will be on London Stock Exchange Group shares at the open, after an investor consortium including U.S. buyout firm Blackstone and Thomson Reuters, the publisher of Reuters News, sold about 2.7 billion pounds ($3.41 billion) of the stock.
On a positive note, data on Wednesday showed Japan's economy emerged from recession and grew faster than expected in the first quarter as a post-COVID consumption rebound offset global headwinds, shoring up hopes for a sustained recovery.
(Lucy Raitano)
