European markets mixed with euro zone GDP, U.S. inflation data in focus

Shares of DCC jumped 10% on Tuesday after the Irish sales, marketing and support-services firm reported a rise in adjusted operating profit in the first half of the year, and announced the acquisition of Germany’s Progas.

British publishing, business intelligence and events group Informa gained 5.4% after lifting its full-year guidance and extending its share buyback, while French automotive parts supplier Valeo also gained 5%.

– Elliot Smith

Former St. Louis Fed President Jim Bullard says the Federal Reserve still has “a ways to go” in fighting inflation and that there is still a risk that prices pick up once again.

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– Elliot Smith

UBS expects the U.S. Federal Reserve to cut interest rates by as much as 275 basis points in 2024, almost four times the market consensus, as the world’s largest economy tips into recession.

The bank estimates that the upward pressure on growth from fiscal impetus in 2023 will fade next year, while household savings are “thinning out” and balance sheets look less robust.

“Furthermore, if the economy does not slow substantially, we doubt the FOMC restores price stability. 2023 outperformed because many of these risks failed to materialize. However, that does not mean they have been eliminated,” UBS said in its 2024-2026 U.S. economic outlook.

“In our view, the private sector looks less insulated from the FOMC’s rate hikes next year. Looking ahead, we expect substantially slower growth in 2024, a rising unemployment rate, and meaningful reductions in the federal funds rate, with the target range ending the year between 2.50% and 2.75%.”

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– Elliot Smith

Euro zone GDP contracted by 0.1% quarter-on-quarter in the three months to the end of September, EU statistics agency Eurostat confirmed on Tuesday.

However, employment across the 20-member common currency bloc rose by 0.3% over the same period, contrary to the typical trend during periods of economic weakness.

– Elliot Smith

Estimated job vacancies in the U.K. fell by 58,000 in the third quarter to 957,000, the Office for National Statistics said on Tuesday.

Annual regular pay growth excluding bonuses was 7.7% between July and September, down slightly from previous periods but remaining among the highest annual growth rates since records began in 2001.

Unemployment remained largely unchanged at 4.2%, while the employment rate dropped slightly to 75.7% and inactivity remained stable at 20.9%.

“The questionable veracity of the ONS figures derived from the Labour Force Survey means it’s hard to confidently assess how fast the labour market is rebalancing, particularly on the labour supply side,” said Jack Kennedy, senior economist at hiring platform Indeed.

But there are reasons to believe, as the Monetary Policy Committee does, that wage growth will prove fairly persistent into next year.”

PwC Economist Jake Finney said the data painted a similar picture to last month and suggests that the labor market is “gradually cooling, not collapsing.”

“For now, wages are growing in real terms, which should herald an end to the worst of the living standards squeeze. However, it is only a matter of time before the cooling of the labour market translates into lower wage growth,” he said.

“For this reason, we are not expecting any significant real wage growth until 2025, when inflation is expected to return to target.”

– Elliot Smith

Vodafone on Tuesday reported a 4.7% rise in group service revenue for its fiscal second quarter, as Germany, the British telecoms company’s largest market, returned to growth.

The group reiterated its full-year guidance that earnings will be roughly flat at around 13.3 billion euros ($14.3 billion) in 2023.

Vodafone shares fell 1% in morning trade, however, as analysts remain unconvinced by restructuring efforts.

“Vodafone’s results are a checklist of everything bad about a company. It has swung to a loss-making position, revenue is down, the dividend is not growing and there is negative free cash flow,” said Russ Mould, investment director at AJ Bell.

“We’ve got the usual rhetoric from the chief executive that the turnaround story is making progress but at the end of the day it’s yet another set of results that remind us how Vodafone has lost its way big time. Work is underway to restructure the group but don’t hold your breath for rapid change.”

– Elliot Smith

Shares of K+S climbed 5.5% in early trade to lead the Stoxx 600 after the German chemical company’s third-quarter results showed improving demand despite a sharp fall in year-on-year earnings due to weak potash prices.

At the bottom of the European blue chip index, Swedish commercial property company Sagax fell 4% after a discounted share sale.

– Elliot Smith

European markets were mixed on Tuesday, with investors looking ahead to preliminary third quarter gross domestic product data from the euro zone, along with October’s U.S. inflation print.

The pan-European Stoxx 600 index was roughly flat in early trade. Basic resources added 0.9% while financial services stocks dropped 0.5%.

Asian markets have had a tumultuous year.

The MSCI Asia ex Japan Index plunged from its January high, losing around 12% since then.

Chinese stocks are especially volatile. Hong Kong’s Hang Seng index is down around 12% in the year to date, while the Shenzhen Component has fallen over 9%.

Those keen on investing in Asia in the face of such uncertainty can consider Morgan Stanley’s selection of Asian stocks it calls “alpha” opportunities for November.

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— Weizhen Tan

Rising commodity prices, increased regulation and a growing recognition of sustainability benefits are set to be “key catalysts” of the circular economy, Goldman Sachs said, naming its “conviction list” stocks to play the theme.

Quoting estimates from McKinsey, Accenture and the United Nations Environment Program, the bank said that the economic benefits of the circular economy range from $2.9 trillion to $4.5 trillion by 2030.

“While regulators, corporates, and investors have placed much emphasis on achieving Net Zero emissions and Biodiversity goals, we believe the critical role a Circular Economy will play in solving for both has been overlooked, particularly as a lack of available resources threatens the speed, scale, and affordability of a clean energy transition,” Goldman’s analysts wrote in a Nov. 2 note.

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— Amala Balakrishner

European markets are expected to open in mixed territory Tuesday.

The U.K.’s FTSE 100 index is expected to open 7 points lower at 7,419, Germany’s DAX up 12 points at 15,348, France’s CAC up 6 points at 7,091 and Italy’s FTSE MIB up 32 points at 28,794, according to data from IG. 

Investors are looking ahead to preliminary third quarter gross domestic product data from the euro zone, as well as the single currency area’s unemployment figures for the third quarter and Germany’s ZEW survey of economic sentiment in November. Earnings come from Vodafone.

— Holly Ellyatt