European stocks traded in positive territory on Tuesday as
investors awaited Jerome Powell's latest speech following last
week's Federal Reserve rate rise.
Powell's comments will be dissected for clues on the path of
The U.S. labor market report last Friday has forced investors to
rethink, and this week's equity theme is that central banks both
need to raise interest rates more and that it may take some time
before we see cuts, SEB said.
Stocks to Watch
Engie's earnings are expected to be hurt by the proposed
inframarginal rent caps and triennial review of Belgian nuclear
provisions, but the company's underlying equity story is still seen
positively, Berenberg said.
The bank forecasts a 6.5% earnings per share annual compound
growth over the 2021-23 period, from previous expectations of 8%,
supported by renewables growth.
The French energy company targets 50 gigawatts of installed
renewables capacity by 2025 and an investment-return criterion of
150 to 250 basis points return spread on all its renewable
Analysts expect Engie's management to present an updated plan
during full-year results, which should expand on this target,
especially in regards to balance sheet headroom.
Legrand is seen with limited upside potential as near-term
electrical product demand is feared to have suffered from a
greater-than expected correction of customer inventories in the
residential sector, Deutsche Bank said.
The bank downgraded its rating on Legrand to hold from buy.
"We also expect management to give conservative guidance for
2023 given the ongoing deterioration in the new build residential
market and the recent decision to completely exit the Russian
market, which still represented 1.5% of revenue in 2022," it
DB expects growth underperforming compared with peers in the
next couple of years due to a less favorable mix.
Stock futures ticked higher as investors looked towards Powell's
Powell is due to speak at the Economic Club of Washington at
17:40 GMT, in an interview with Carlyle Co-Chairman David
There's also data on trade and consumer credit, as well as a
speech from Vice Chair for Supervision Michael Barr.
The dollar pulled back after earlier gains as raiders awaited
"Powell is likely to sound hawkish again..., thus possibly
providing a little more support for USD," Commerzbank said.
However, the market continues to expect the Fed to cut interest
rates this year and the ECB is also likely to sound hawkish, which
limits the scope for EUR/USD to fall, it added.
The Riksbank needs to raise interest rates 50 basis points and
signal further rate rises on Thursday to prevent further Swedish
krona losses, ING said.
EUR/SEK is around 2.5% below its short-term fair value as
markets increasingly price in the risk of Sweden facing high
inflation, a recession and a housing market crash, ING added.
"There is no quick fix to restore confidence in the krona, and
data will play a big role along the way, but for now, a hawkish
50bp hike by the Riksbank is a necessary move to try and halt the
The market keeps having second thoughts about the initial rally
in eurozone government bonds that was ignited by the ECB with Bund
yields rising back above their levels before the ECB meeting, with
the exception of the short end, Commerzbank said.
"With yields above 2.25%, at least the carry for short to
intermediate Bunds remains positive after the 50bp rate hike has
almost arrived in full in German repo rates yesterday."
Generali Investments Partners favors a highly cautious and
tactical investment approach for the time being, tactically playing
the Bund yield range between 2% and 2.5%, with a risk that this
could break higher, it said.
"We hold a negative view on the short end of the yield curve,
given the two-year Bund yield currently aligns with official
interest rates of 2.5%, which are expected to increase."
Overall, the portfolios of Generali Investments Partners' euro
bond strategies are tactically short duration and defensive
following the recent rally, Generali added.
They hold a moderate exposure to peripheral euro government bond
debt, having reduced exposure in recent weeks following good
Oil pared earlier gains of more than 2% after Reuters reported
that oil was being pumped on a pipeline linking Northern Iraq and
Ceyhan, a key terminal on Turkey's Mediterranean coast, while
exports from the terminal were expected to resume later today.
Meanwhile, Equinor said it had halted production at a major
facility in the North Sea due to a technical fault unrelated to the
earthquake, with the outage expected to last until at least
Rising metal costs for wind turbines slowed their installation
in Europe last year, according to Bank of America.
"Countries have failed to deliver on their ambitious wind-farm
targets, partly because the costs of key inputs, including steel
and copper, have been volatile and are trending higher,"
BofA said that 12 gigawatts of wind capacity was installed
between January and November last year, citing WindEurope, but that
30 gigawatts need to be installed each year if the European Union
is to meet its climate goals.
It added that the "economics of energy transition projects need
to be addressed at an early stage," as costs rise for renewable
technologies, with raw materials accounting for 15-20% of the
Base metals were mixed and gold higher, as a rising dollar and
firmer crude prices pulled the commodities complex in different
The macro environment was sending mixed signals, Peak Trading
"Crude oil has recovered some ground and forward-looking
inflation metrics are up, but the U.S. dollar is at four-week highs
following last week's strong U.S. employment data."
Peak Trading Research added that markets were trading
fundamentals over macro sentiment.
DOW JONES NEWSPLUS
Apollo in Talks to Take Stake in Credit Suisse
Apollo Global Management is among a group of financial firms in
talks to take a stake in Credit Suisse Group AG's revamped
investment bank, people familiar with the matter said.
Credit Suisse said last year that it would carve out the
advisory part of its investment-banking operation into a new entity
under the resurrected CS First Boston brand following a string of
scandals. The bank said it would raise outside capital to launch
the new entity, which it hopes to list in a separate initial public
BP Slows Transition to Renewable Energy as Oil Bonanza
LONDON-BP PLC said it would slow its transition to lower-carbon
energy, as oil-and-gas production helped push the company to a
record profit last year.
BP's results showed it joining its peers on both sides of the
Atlantic in capitalizing on soaring energy prices. And its
strategic shift highlighted how fossil fuels continue to be the
profit drivers for the industry's biggest players.
Ams-Osram Shares Slump on Weak Smartphone, Auto Sensors
Shares of Ams-Osram AG plunged in Tuesday morning trading after
the Austria-based electronics company said it was experiencing weak
smartphone volumes and muted demand in the automotive sector for
the current quarter, with revenue expected to come below analysts'
At 0950 GMT, Ams-Osram's Swiss-listed shares traded 18% lower at
Carlsberg Warns on Costs Pressures Ahead of Challenging Year -
Carlsberg AS on Tuesday raised its dividend but held back
launching a new share buyback and cautioned that 2023 will be
another challenging year amid elevated cost pressures.
The Copenhagen-based brewer said that due to hedging, last
year's commodity and energy price increases will have a significant
hit on cost of sales and logistics costs this year.
German Industrial Production Fell in December
German industrial production declined more than expected in
December, after an upwardly revised output in November, data from
the German federal statistics office Destatis showed Tuesday.
Industrial output, comprising manufacturing production, energy
and construction, fell 3.1% on month in December on a price-,
seasonally- and calendar-adjusted basis, Destatis said. Economists
in The Wall Street Journal's poll forecast a 0.6% decline.
BNP Paribas Raises Targets, to Launch Buyback After Revenue
Surges on Interest Income
BNP Paribas SA's fourth-quarter profit fell but revenue rose on
bumper net interest income, as it raised its targets to 2025 and
said it would launch a 5 billion euro share buyback.
The French bank, the largest in the eurozone by market
capitalization, reported net profit of 2.15 billion euros ($2.31
billion) in the three months to December, down from EUR2.31 billion
in the same period in 2021.
Siemens Energy 1Q Net Loss More Than Doubled - Update
Siemens Energy AG said Tuesday that its net loss more than
doubled in the first quarter of fiscal 2023 as Siemens Gamesa
Renewable Energy SA's operational troubles weighed on performance,
and that it plans a capital raise as part of its takeover of the
The German energy company registered a quarterly net loss of 598
million euros ($643.4 million) for the quarter ended Dec. 31, from
a loss of EUR246 million in the same period the previous year.
Holcim Buys US Roofing Company Duro-Last for $1.29 Bln
Holcim Ltd. said Tuesday that it has agreed to buy U.S.
roofing-systems company Duro-Last in a deal valued at $1.29
The Swiss building-materials company said Duro-Last will
strengthen its roofing offering, as its roofing-systems sales will
exceed $4 billion ahead of schedule. Duro-Last generates pro-forma
net sales of $540 million, Holcim said.
A digital currency is likely to be needed, says U.K. Treasury
and Bank of England
The U.K. government said Monday that a digital currency is
likely needed, as countries around the world examine the changing
nature of payments.
A statement issued by both the U.K. Treasury and the Bank of
England said they were seeking comments, though they said no
decision has yet to be taken. The consultation will run through
early June, and a decision about whether to implement a digital
pound will be taken around the middle of the decade. The earliest
stage at which the digital pound could be launched would be the
second half of the decade.
U.K. Regulators Are Urged to Address Pension Risks After Last
British regulators failed to properly monitor the risks created
by the derivatives-based investment strategy that upended the
U.K.'s pension sector last year, an investment approach that poses
a continuing risk to companies if changes aren't made, according to
a U.K. legislative panel.
Liability-driven investments, known as LDIs, invest in
derivatives that are tied to U.K. government bonds known as gilts.
They help pensions match long-term liabilities they have to
retirees with less capital than they would need had they owned
regular long-dated gilts. That allows them to manage exposure to
changes in bond yields and free the funds' balance sheets to invest
in higher-returning investments such as stocks, real estate or
The Market's Breadth Is Improving as More Stocks Join Rally
More stocks across different sectors are participating in the
market's 2023 rebound, often an encouraging sign of a rally's
The S&P 500 has risen 7.1% in 2023, with last year's worst
performers bouncing back sharply to lead the way. Some of the
bellwethers of the U.S. stock market, including Meta Platforms
Inc., Apple Inc. and Microsoft Corp., have broken through their
long-term trend lines in recent sessions.
Bonds Have Been in Rally Mode. Don't Get Excited-The Fed Has
More Work to Do.
Bonds got off to a great start this year but there may be
challenges ahead as recent data suggest the Federal Reserve has
more work to do.
There were 517,000 jobs added to the economy in January, more
than double the level recorded in December and nearly triple the
number forecast by economists. The white-hot labor market means
that, while the Fed's interest rate hikes have shown some success
in cooling inflation, the hikes have yet to lead to a meaningful
drop in consumer demand as companies still feel the need to add
labor-particularly in service-oriented parts of the economy.
China Foreign Exchange Reserves Rose as Dollar Weakened in
China's foreign-exchange reserves rose in January, official data
showed Tuesday, amid a weakening U.S. dollar.
The reserves rose by $56.8 billion from a month earlier to
$3.184 trillion, said the State Administration of Foreign Exchange.
The rise was wider than the $26 billion increase expected by
economists polled by The Wall Street Journal.
U.S. Air Defenses Failed to Spot Earlier Chinese Balloon
Intrusions, General Says
WASHINGTON-The military command in charge of U.S. air defenses
failed to detect suspected Chinese surveillance balloons before the
recent intrusion and learned about them later from intelligence
agencies, the general overseeing the command said Monday,
acknowledging a gap in defenses.
Gen. Glen VanHerck, commander of Northern Command and North
American Aerospace Defense Command, contrasted those previous
lapses in detecting balloons with the airship the military tracked
and shot down Saturday. He described a surveillance gap and said
the U.S. is trying to determine why the earlier flights went
Kevin McCarthy Targets Elimination of Budget Deficits in
WASHINGTON-House Speaker Kevin McCarthy said Republicans would
seek to eliminate the annual budget deficit in talks with Democrats
over raising the debt limit, a demand that would likely require
deep cuts to federal spending.
Since they took control of the House last month, Republicans
have been arguing that Congress should cut spending in exchange for
GOP support for raising the debt limit, now at about $31.4
trillion. In an address Monday ahead of President Biden's State of
the Union address on Tuesday, Mr. McCarthy (R., Calif.) laid out
the size of the cuts Republicans are seeking.
Biden to Urge Quadrupling New 1% Tax on Stock Buybacks
WASHINGTON-President Biden plans to propose quadrupling the 1%
tax on stock buybacks that took effect in January, which the White
House said would encourage companies to invest in their growth
instead of boosting shareholders.
Mr. Biden will discuss the proposed change during his State of
the Union speech on Tuesday, the White House said in a preview of
the address, in which the president will also tout economic
progress since the early days of the Covid-19 pandemic. The plan to
boost the buyback tax might struggle to advance through the divided
Congress, where Republicans control the House.
Earthquake Rescue Efforts in Turkey, Syria Hampered by Snow
ISTANBUL-Snow, freezing temperatures and blocked roads hindered
efforts to rescue survivors trapped under collapsed buildings
across southern Turkey and northern Syria after two powerful
earthquakes killed more than 5,000 people and destroyed thousands
Aid workers from around the world poured into Turkey on Tuesday
to support local rescue efforts after a 7.8-magnitude earthquake on
Monday morning was followed by a 7.5-magnitude quake in the
Write to email@example.com
Write to us at firstname.lastname@example.org
We offer an enhanced version of this briefing that is optimized
for viewing on mobile devices and sent directly to your email
inbox. If you would like to sign up, please go to
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
February 07, 2023 06:25 ET (11:25 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.