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EMEA Morning Briefing : Stocks to Bounce Back as Volatility Continues


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ECB Financial Stability Review; Germany GfK survey, GDP detailed breakdown; France Consumer Confidence Index; FOMC meeting minutes; updates from Lanxess, Hapag Lloyd, Renault, Valeo, Bollore, Legrand, Publicis, Safran, Severn Trent, Mediclinic, Marks & Spencer, SSE, Intertek, M&G, Norwegian Air Shuttle, Tullow Oil, X5 Retail

Opening Call:

European stock-index futures suggest markets should recover most of Tuesday’s losses when trading resumes later this morning and despite another volatile session on Wall Street. In Asia, shares were mostly higher, along with the dollar, Treasury yields and oil, while gold wavered.


European shares will likely rebound early Wednesday, as the market volatility continues.

U.S. stock indexes ended mostly lower Tuesday and a selloff in technology stocks deepened as concerns about economic growth and rising interest rates continued to weigh on markets.

All three of the major indexes had fallen more deeply into the red on Tuesday morning as downbeat reports about home sales and corporate outlooks deepened investors’ gloom. Stocks recovered somewhat later in the day, but investors said that finding good reasons to jump into the market remained an uphill battle as negative signs about the economy’s health mount.

“What’s changed in the last few weeks is that the range of concerns has broadened so dramatically,” said Eric Leve, chief investment officer at investment-management firm Bailard. “It was inflation that was front and center for everyone for so long. Now, it’s far beyond that.”

Read: Dow, S&P 500 Head for Worst Start to a Year Since 1970

Read: ‘Markets are imploding’ Because Fed Isn’t Doing its Job, Says Bill Ackman


The dollar made some gains in a generally-cautious Asian session as investors looked ahead to the FOMC’s May meeting minutes.

MUFG Bank’s London team thinks the minutes could deliver a hawkish surprise if there are serious discussions for even more aggressive rate increases to curb inflationary pressures and this could push the USD Index back toward the middle of the Bollinger band, currently around 102.76.

Navellier & Co. Chairman Louis Navellier said a strong dollar is helping moderate inflation.

“It’s widely viewed that inflation has peaked in America. This is because energy and commodity companies are largely paid in dollars since all commodities are priced in dollars. On the other hand, inflation is still running amuck in countries with weak currencies. Our Federal Reserve continues to raise rates and strengthens the dollar versus Japan and Europe.”


Treasury yields edged higher early Wednesday after an aggressive rally in bonds, sparked by persistent concerns about U.S. growth, pushed two- and 10-year yields to their lowest levels in more than a month Tuesday.

Investors remain focused on inflation and the Fed’s response following some weak economic data.

“The flash PMIs for May suggest that activity slowed in most DMs [developed markets] compared to April, and weaker growth in new orders points to a further slowdown to come,” said Capital Economics.

Despite “positive developments on the supply front, firms’ costs rose at their fastest rate on record, suggesting that price pressures will continue to weigh on economic activity.”

Other News:

The Treasury Department moved to cut off Russia’s ability to make payments on its dollar-denominated sovereign debt, putting Russia on a path toward defaulting on its foreign debts this summer and deepening the country’s economic isolation after its invasion of Ukraine.

Read more here.


Oil futures pushed higher in Asia after U.S. Energy Secretary Jennifer Granholm was reported saying the Biden administration hadn’t ruled out a ban on petroleum exports to tame fuel prices.

Focus remained on the timeline for an EU oil embargo on Russia after a further setback following Hungary’s declaration of a state of emergency at home over the Ukraine war.

Hungarian Prime Minister Viktor Orban, who is the main hurdle to an embargo, wrote to Charles Michel, who organizes EU summits, warning him he won’t discuss the oil embargo at a summit Monday and Tuesday, where many EU diplomats had hoped the issue would be settled after weeks of tense negotiations. Hungary has refused to back the oil ban.

Read more here.

“The likelihood of an agreement on European sanctions on Russia oil in the near term continues to decline,” said ANZ.

European Commission President Ursula von der Leyen has reportedly said she doesn’t expect EU leaders to reach an agreement on the matter next week, ANZ added.

Other News:

George Soros said Europe has a much stronger position than it recognizes regarding its reliance on Russian gas, and Vladimir Putin is “bluffing” about threats to shutdown gas to the region. “Putin has been very clever but his case is much less strong than he pretends,” Soros said.

Russia’s natural gas storage is full and failure to sell it to Europe would require a shutdown of energy fields in Siberia. Antiquated equipment means shutting down the fields would lead to output falling by half when production is restarted.

“This is facing Putin in July,” Soros said, adding that he detailed his analysis in a letter to Italian Prime Minister Mario Draghi Monday. “I sent it to Draghi because he is the most keen to champion this.”

The American Petroleum Institute reported inventories of crude oil in the U.S. rose by 600,000 barrels in the latest week, according to a source citing the data, while gasoline supplies dropped by 4.2 million barrels.

The somewhat bearish results were released ahead of official inventory data from the DOE Wednesday. Average forecasts in a WSJ survey indicate the report will be a bit more bullish for crude prices and show that inventories fell by 600,000 barrels and that gasoline supplies decreased by 1.2 million barrels.


Gold futures eased lower in Asian trade after they scored a fourth straight daily gain Tuesday, as U.S. economic data pointed to economic headwinds being produced by high inflation.

Expectations of higher yields and a stronger dollar, as the Fed undertakes an aggressive tightening cycle, will likely mean the market remains cautious, said ANZ.

“Gold should remain supported as inflationary pressures weigh further, China’s Covid situation remains a big unknown, and corporate America continues to slash outlooks,” said OANDA.

Aluminum prices weakened on concerns over Beijing’s latest plans for economic stimulus.

In the context of continued Covid-19 lockdowns in China, the measures are lacking in terms of relief for the consumer, said TD Securities strategists.

Going forward, base metals remain in a precarious position, as global recession fears gain steam on top of an already weakening demand profile from China’s lockdowns,…

Read More : EMEA Morning Briefing : Stocks to Bounce Back as Volatility Continues

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