Euro Retreats As Weak Data Spurs Bets On ECB Cuts: Markets Wrap

The euro slumped and German yields fell as weaker-than-expected data fueled concern the region’s economic recovery has hit a wall, spurring wagers on more aggressive rate cuts from the European Central Bank.

The common currency weakened as much as 0.7% against the dollar, heading for its steepest daily decline since June. The gap between French and German benchmark yields climbed to the highest level since early August.

European stocks fluctuated, with so-called defensive plays in the food, telecoms, real estate and utilities sectors faring best. US futures pointed to modest gains on Wall Street with indexes hovering near record highs after the Federal Reserve’s jumbo rate cut last week.

Investors are increasingly wary of European assets as the region’s manufacturing downturn deepens and political turmoil in France continues. Weak PMI data for France and Germany on Monday was followed by numbers that showed the euro-area’s private-sector economy shrank for the first time since March.

“The market is almost demanding a more aggressive rate cut, especially after what we have seen the Fed has done,” Marija Veitmane, senior multi-asset strategist at State Street, said on Bloomberg TV. The ECB “is definitely behind the curve,” she said.

A slate of Fed speakers later Monday including regional presidents Raphael Bostic and Austan Goolsbee may give fresh insight on the pace and scope of easing. Further out, the Fed’s preferred price metric and data on US personal spending will be in focus on Friday.

Corporate Highlights:

• Rightmove Plc shares rise as much as 5.3% after Australia’s REA Group made a third cash and share offer for the UK property portal
• Apollo Global Management Inc. has offered to make a multibillion-dollar investment in Intel Corp., according to people familiar with the matter, in a move that would be a vote of confidence in the chipmaker’s turnaround strategy. Intel’s shares rose about 2% in premarket trading.
• BNP Paribas SA agreed to buy HSBC Holdings Plc private banking operations in Germany, as the French lender seeks a bigger slice of the nation’s growing market for wealth management.
• US billionaire Dan Friedkin is closing in on a takeover of Everton FC, the Premier League team that has been struggling to find a buyer, according to people familiar with the situation.

In Europe, the composite Purchasing Managers’ Index by S&P Global dropped to 48.9 in September from 51 the previous month — below the 50 threshold separating growth from contraction. Analysts had expected the measure to slip only marginally, to 50.5.

The widening yield gap between France and Germany shows investors remain on edge over France’s political and fiscal challenges since President Emmanuel Macron called a surprise election in June.

A new French cabinet named late Saturday is a patchwork of conservatives and centrists who haven’t always worked smoothly together, and opposition blocs in parliament are threatening no-confidence votes that could topple the government. Investors are concerned that were the government to collapse, it would jeopardize the administration’s ability to pass a budget through parliament over the coming weeks.

Elsewhere, Asian markets were lifted by speculation China is close to announcing fresh stimulus, after a cut to a short-term policy rate and a rare economic briefing scheduled for Tuesday.

“The start of the Fed easing cycle should lead to more stimulus from China, particularly as the 5% growth target seems difficult to achieve,” Mohit Kumar, chief strategist and economist for Europe at Jefferies International Ltd., wrote in a note. The “stimulus measures should also be beneficial for Europe.”

Gold touched a record high before paring the move, as the worsening strife in the Middle East fueled wagers on further price gains in the metal due to its haven status.

Key events this week:

• Australia rate decision, Tuesday
• Japan Jibun Bank Manufacturing PMI, Services PMI, Tuesday
• Mexico CPI, Tuesday
• Bank of Canada Governor Tiff Macklem speaks, Tuesday
• Australia CPI, Wednesday
• China medium-term lending facility rate, Wednesday
• Sweden rate decision, Wednesday
• Switzerland rate decision, Thursday
• ECB President Christine Lagarde speaks, Thursday
• US jobless claims, durable goods, revised GDP, Thursday
• Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday
• Mexico rate decision, Thursday
• Japan Tokyo CPI, Friday
• China industrial profits, Friday
• Eurozone consumer confidence, Friday
• US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 6:11 a.m. New York time
• Nasdaq 100 futures rose 0.3%
• Futures on the Dow Jones Industrial Average were little changed
• The Stoxx Europe 600 rose 0.2%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.5% to $1.1110
• The British pound fell 0.2% to $1.3295
• The Japanese yen rose 0.3% to 143.41 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $63,538.38
• Ether rose 2.7% to $2,643.59

Bonds

• The yield on 10-year Treasuries was little changed at 3.74%
• Germany’s 10-year yield declined five basis points to 2.16%
• Britain’s 10-year yield declined one basis point to 3.89%

Commodities

• West Texas Intermediate crude rose 0.3% to $71.19 a barrel
• Spot gold was little changed

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