UKX FTSE 100 Index

MARKET WRAPS

Stocks:

European stocks ticked lower on Tuesday, as concerns over the health of the global economy persisted, and as investors look to next week's central bank policy decisions.

There's uncertainty over how the ECB will position itself at the June 15 meeting given mixed messaging from policymakers recently and as ECB members are prevented from making further comments the week before the meeting, Commerzbank said.

The Fed's rate decision next week is also in focus. Tuesday's weak U.S. services report "was in sharp contrast to other service sector numbers, raising more questions than answers about the strength of the US economy, ahead of next week's Fed meeting," CMC Markets said.

Stocks to Watch

GSK had a strong financial performance in the first quarter, but at the same time it is one of the weakest performers in the pharma sector, since its stock is currently trading 40% below the value of its marketed assets, Berenberg said.

The stock has failed to recover its losses since the summer of 2022, despite the dismissal of court cases in the U.S. and Canada on heartburn drug Zantac, Berenberg added.

However, there are some catalysts in GSK's pipeline that are going to drive momentum--notably the RSV vaccine and some new approvals such as myelofibrosis treatment momelotinib and the company's next-generation HIV pipeline, Berenberg said.

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RWE is well positioned to capitalize on energy-transition opportunities thanks to a diversified renewables pipeline and its flexible hydropower, gas, biomass generation business, Berenberg said, lifting its target price to EUR57 from EUR53, and maintaining a buy rating.

"The company has the financial headroom, combined with a deep technologically and geographically diversified pipeline, to provide it with the optimal toolkit to sustain returns on investment and seize on new opportunities that might arise from supportive legislation, such as the U.S. Inflation Reduction Act, [and] the EU's evolving Green Deal," it said.

U.S. Markets:

Markets displayed a cautious tone after Wall Street's latest advance to fresh highs for the year faltered late in the previous session.

Stocks to Watch

GitLab rose 27% premarket after the software development platform's quarterly earnings beat expectations.

Unity Software rose 23% premarket, building on big gains made Monday after Apple said it was working with the game-development company on the new Apple Vision Pro headset. Apple was 0.4% lower offhours ahead of the second day of its Worldwide Developers Conference.

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Forex:

The euro is likely to linger around its current level versus the dollar in coming days as the market awaits next week's policy decisions from the ECB and the Fed, Commerzbank said.

"That means the euro is also likely to lack any momentum for significant moves."

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The dollar was lower as Monday's unexpectedly weak ISM services activity data raised concerns about the economy, which could hinder further Fed rate increases.

"The dollar is being held back by the reluctance of U.S. rate market participants to price in another rate hike as soon as next week's FOMC meeting," MUFG said.

MUFG expects the dollar to weaken later this year as inflation will likely slow more quickly than expected.

Bonds:

Commerzbank Research recommends investors tactical longs at yield levels of 2.4% for the 10-year German Bund.

"Bunds trade heavy but should find support after yesterday's underperformance against U.S. Treasuries and with the front end pricing a terminal depo rate [where the European Central Bank pauses interest-rate rises] above 3.75% while U.S. data underscore the macro risks," the bank said.

Read Greek-German Bond Spread Could Tighten on Any Positive Change By Fitch

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The Norwegian government bond yield curve has become less inverted lately as a result of a fall in short-end yields and rising long-end yields, SEB said.

Norwegian government bonds have seen solid demand in the short end recently due to reinvestments following the NOK60 billion redemption of the 2.00% May 2023 government bond, while long-end yields moved higher, it said.

"The long end has followed the international trend with higher yields in response to hawkish signals from Fed and the ECB," SEB said ahead of the NOK2 billion auction of the 3.00% August 2033 bond on Wednesday.

With the market now more balanced, SEB expects healthy demand at the auction, suggesting it should be smooth.

Energy:

Oil prices were more than 1% lower, unwinding all their gains following Sunday's OPEC+ meeting, as inventors focus on worries about the global economy.

"The macro outlook continues to be a more important driver for prices than fundamentals at the moment," ING said.

Read Brent Unlikely to Head Toward $100/bbl This Year

Read Governments Should Act to Diversify SAF Production, IATA Says

Metals:

Base metals were mixed, with gold marginally higher, on global macro uncertainty.

It is a light data week with consumer price inflation and central bank rate decisions due next week, helping commodities tread sideways, Peak Trading Research said.

However, according to ANZ Research, demand weakness, particularly in China, has already been priced in so goods such as copper aren't likely to see major pressure.

"While demand remains subdued, we see supply challenges lifting prices. Lower inventories are protecting against downside risks," ANZ said.

DOW JONES NEWSPLUS

EMEA HEADLINES

German Manufacturing Orders Fell Unexpectedly in April on Low Foreign Demand

New orders at German factories fell unexpectedly in April, signaling continued declining demand in the country's key manufacturing sector especially among foreign orders.

Manufacturing orders ticked down 0.4% in April on month, after a plunge of 10.9% in March, according to seasonally and calendar adjusted-data released Tuesday by the German statistics office Destatis.

UK Retail Sales Growth Slowed in May Despite Bank Holidays, BRC Says

Retail sales growth in the U.K. in May slowed to its lowest level in six months, with three bank holidays in the same month failing to convince shoppers to buy more, the latest sales-monitor report from the British Retail Consortium showed.

Total retail sales for the four weeks to May 27 increased by 3.9% compared with the prior month, below the three-month average growth of 4.7%, the report said. Retail sales fell 1.1% in May 2022.

British American Tobacco Backs 2023 Guidance, Existing Strategy

British American Tobacco on Tuesday reiterated 2023 guidance for revenue and earnings growth, and backed its existing strategy.

The FTSE 100 tobacco group maintained full-year constant-currency guidance of revenue growth at 3%-5%, and mid-single-digit adjusted diluted earnings-per-share growth, with operating cash conversion of more than 90%.

Saudi Output Cut to Boost Oil Prices Could Be Costly

VIENNA-Saudi Arabia over the weekend slashed 10% of the kingdom's oil output to boost prices, and the returns so far suggest it could be a costly bet.

After warning speculators that OPEC+ could cut oil production again, Saudi Energy Minister Prince Abdulaziz bin Salman announced Sunday that the world's biggest crude exporter would reduce 1 million barrels of its own output in July after other cartel members refused to join the effort. The Organization of the Petroleum Exporting Countries and its Russia-led allies account for close to half of the world's oil production. An output cut was expected to prop up prices amid concerns about a slowing global economy crimping energy demand.

Major Dam Destroyed in Russian-Occupied Ukraine

KYIV, Ukraine-A major dam and power station in a Russian-occupied part of Ukraine was destroyed Tuesday, with both sides accusing each other of being responsible for an incident that has caused serious flooding, put thousands of homes at risk and potentially threatened the safety of Europe's largest nuclear power plant.

Footage posted online in the early hours of Tuesday showed vast quantities of water moving downstream from the power station-which separates Ukrainian and Russian-held parts of the Kherson region-and flowing through spaces where buildings comprising the power station have collapsed or been blown up.

GLOBAL NEWS

RBA Announces Further Rate Increase, Sees More on Horizon

SYDNEY-The Reserve Bank of Australia announced its 12th rise in interest rates in just over a year on Tuesday, further ratcheting up stress levels on an already massively burdened mortgage sector while warning that if inflation remains problematic, further increases are likely.

The increase in the official cash rate by 25 basis points to 4.10% took it to its highest level since early 2012. The move followed warnings from RBA Gov. Philip Lowe last week that rising wages and the absence of productivity growth could trigger further increases.

This Rally Is All About a Few Star Stocks-And Some Investors Are Worried

Major indexes have overcome a series of challenges to power higher this year. But some investors are worried that this performance rests on just a few heavyweight stocks.

The S&P 500 has climbed 11% this year and is poised to enter a new bull market after rising almost 20% from an October trough. Most major indexes in Europe are up more than 10% in 2023, with France's CAC 40 among those that are hovering near all-time highs.

GOP Lawmaker's Battle With FBI Persists After Viewing Document on Biden

WASHINGTON-A top House Republican said he would work to hold FBI Director Christopher Wray in contempt for not handing over a document GOP leaders view as central to a congressional probe into financial dealings of President Biden and his family, even after bureau officials provided lawmakers with access to the record in a closed-door briefing.

Following the more-than-hourlong session in a secured facility at the Capitol, Rep. James Comer of Kentucky said Monday he would initiate contempt proceedings on Thursday because the Federal Bureau of Investigation had "again refused to hand over the unclassified record to the custody of the House Oversight Committee."

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 06, 2023 06:05 ET (10:05 GMT)

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