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STOXX 600 up 0.1%
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Barclays slides on profit slump
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Carrefour, Ahold Delhaize jump
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Wall Street futures lower
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EUROPE'S GREEN SPENDING: A LONG-TERM BENEFIT FOR STOCKS (1119 GMT) The Biden Administration's Inflation Reduction Act rattled Europe. Biden's major law includes hundreds of billions of dollars of green subsidies, which the EU feared might encourage companies to relocate, potentially making the U.S. a leader in green technologies at Europe's expense.
Europe's response was the Green Deal Industrial Plan (GDIP), announced earlier this month with the objective of helping Europe compete as a manufacturing hub for clean tech products.
Barclays believes the GDIP could add a "touch of reflation" to the region's macro dynamics and might provide a boon to the region's stocks over the long-term. "We believe the higher investment it entails should bring back some of the reflationary impulse, providing a boost to capex and overall domestic demand, especially for cyclically oriented sectors," Barclays says.
"Sectors such as mining, energy, semis, cap goods, autos, chemicals, construction materials and utilities should gain materially from the rise in investment," they note. Barclays says full benefits "will take time to materialise" but the mix of higher spending and more fiscal integration could benefit EU equities in the long-run.
On the other hand, the bank says shippers and airliners face headwinds from a material increase in carbon costs.
(Samuel Indyk)
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WHY THE STRONG EURO WILL BE EVEN STRONGER (1028 GMT)
The single currency has enjoyed quite a rally versus the
U.S. dollar since late last year, even though it's dipped below
early February's 10-month highs.
Economic data is always critical for currencies in that it
helps shape the outlook for monetary policy.
But, according to George Saravelos, global head of forex
research at Deutsche Bank, we should also look at "underlying
flow dynamics, which are turning dramatically more positive for
the euro this year."
"European investors embarked on a huge divestment program of
domestic yield in favour of foreign assets over the last
decade," Saravelos say sin a note.
"Compared to just a few months ago, we observe a net EUR
800bn shift in portfolio flows in favour of the euro," he adds.
This is consistent with client feedback throughout Deutsche
Bank marketing in Continental Europe in recent weeks: money
managers are seeing waves of investment flows into European
fixed income for the first time in a long while.
Last but not least is the drop in natural gas prices.
"On current trends, gas storage could be refilled by the
summer. After that, Europe won't need more gas until winter,"
says Saravelos.
(Stefano Rebaudo)
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BARCLAYS SLIDES, SUPERMARKETS SHINE (0904 GMT)
European shares are mixed with outperformance seen in France
and weakness in Britain's FTSE 100 following a slew of earnings
reports from large-cap companies.
Europe's notable mover is Barclays, shares are down around 8.5% in huge volumes, after the bank recorded a 14% slide in profit, in part due to an administrative error that saw it oversell securities in the United States.
Shares in other British banks balked at Barclays' blunder,
with the FTSE 350 banking index shedding 2% as
NatWest and Lloyds are both dropping 2.1%.
At the other end of the spectrum, European supermarkets are
the top gainers with France's Carrefour and Netherlands' Ahold
Delhaize sitting pretty at the top of the STOXX 600 following
upbeat earnings.
Europe's benchmark index is little changed.
France's CAC 40 is up 0.7%, Germany's DAX is up
0.4% and Britain's FTSE 100 is down 0.1%.
Here's your opening snapshot:
(Samuel Indyk)
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EUROPE SET FOR CAUTIOUS START (0728 GMT)
European equity futures are pointing to a slightly softer
open after Fed officials continued to bang the drum for higher
rates in the wake of January's CPI report.
Futures on the Euro STOXX 50 are down 0.2%.
Britain's FTSE 100 and Germany's DAX futures are
both off 0.1%, while Wall Street futures are firmly in the red.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 1.6% and Japan's Nikkei share average sank 0.4%.
Back to Europe and it's a heavy earnings day.
Barclays reported a 14% decline in annual profit, Glencore declared a $7.1 billion payout to shareholders after a record trading profit, Kering sales fell 7% following a slump at its Gucci brand and Heineken recorded better than expected profit on a rebound in Asia.
(Samuel Indyk)
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WHEN MEETING EXPECTATIONS ISN'T ENOUGH (0704 GMT)
It was billed as one of the most important data points for makets that were desperate for signs on whether U.S. inflation is steadily retreating. While U.S. consumer prices stuck to the consensus expectation on a monthly basis, heating up to 0.5% from December's 0.1%, largely due to rising energy prices, the CPI increased more than expected in the 12 months through January. The annual rise was however the smallest since late 2021. That sent the S&P down but the Nasdaq index ended up, while two-year Treasury yields rose to 3.799, the highest since January. It looks like markets are still unable to make up their minds on the data's long-term impact. The drumrolls from the Fed continued. Officials said the U.S. central bank would need to keep gradually raising interest rates to beat inflation. After the inflation data, traders of interest rate futures now see the Fed raising borrowing costs three more times, bringing the policy rate to the 5.25%-5.50% range by July, if not June. Today, January's inflation report from Britain is set to show year-on-year double-digit price increases, underlying why the country will see more interest rate rises despite being the only G7 economy that the IMF expects to shrink this year. European stocks, which flirted with a near one-year peak on Tuesday before ending flat, are expected to open lower as Euro Stoxx 50 futures declined. U.S. futures also edged down. The Bank of England has had to raise borrowing costs even though the economy has struggled, after a post-pandemic boost faltered amid the country's cost-of-living crisis. While basic pay in Britain grew more quickly again in the last three months of 2022, retail sales in December - when people are likely to splurge - declined by the most for that month in at least 25 years. The Financial Times reported on Tuesday that British Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt are considering a deal to end a wave of strikes among public sector workers that would backdate next year's pay rise. Meanwhile, investors turned more optimistic about the global economy in February, flocking to emerging market stocks and cutting their cash holdings to levels last seen before the war in Ukraine, a BofA survey of global investors showed on Tuesday. OPEC raised its 2023 global oil demand growth forecast, its first upward revision in months, as China relaxed its COVID-19 curbs, and pointed to a tighter market. President Joe Biden picked Federal Reserve Vice Chair Lael Brainard and White House economist Jared Bernstein to lead his economic team, part of a fresh push by the Democratic president to convince sceptical Americans that his economic policies are working. Key developments that could influence markets on Wednesday:
European economic data: UK Jan CPI U.S. economic data: Retail sales
U.S. results: Cisco, Kraft Heinz Speakers: ECB President Christine Lagarde takes part in a plenary debate on the ECB Annual Report 2022 in parliament
(Anshuman Daga)
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