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(C) Reuters.

Investing.com – European stock markets traded lower Wednesday, as weak German factory orders and rising oil prices added to global growth concerns.

At 03:35 ET (07:35 GMT), the DAX index in Germany traded 0.3% lower, the FTSE 100 in the U.K. fell 0.9% and the CAC 40 in France dropped 0.8%.

German factory orders slumped in July

Data released Wednesday showed that German factory orders fell 11.7% in July, slumping after the prior month’s revised 7.6% gain.

June’s hefty jump was helped by sharp gains in the aerospace sector, and excluding these large orders, overall monthly activity would have declined by 2.6%.

With July’s drop, the overall picture in the industrial sector of the largest economy in the eurozone remains very weak.

Manufacturing data from Germany, Britain and the euro area also showed declines on Tuesday, while their service sectors fell into contraction.

This added to a private-sector survey showing China’s services activity expanded at the slowest pace in eight months in August.

Eurozone retail sales due

Turning to the eurozone as a whole, retail sales are expected to have weakened in July, showing that consumers in the region remain under pressure as inflation remains elevated.

Data due for release later in the session are expected to show that retail sales fell 0.1% on the month in July, a drop of 1.2% on an annual basis.

The European Central Bank meets next week, and a run of soft eurozone data has raised the likelihood that the bank’s officials will agree to a pause in the rate-hiking cycle.

Telefonica (NYSE:TEF) gains after Saudi stake move

In corporate news, Ashmore (LON:ASHM) stock fell 1% after the emerging markets-focused fund manager reported a 6% fall in annual profit, as assets under management slumped by almost a quarter.

On the flip side, Telefonica (BME:TEF) stock rose 2.5% after Saudi Arabia’s STC Group amassed a 9.9% stake in the Spanish telecom giant, in a move to become its top shareholder.

Crude near 10-month highs after top producers extend output cuts

Adding to Europe’s potential problems was oil trading near 10-month highs after major producers Saudi Arabia and Russia unexpectedly extended their voluntary supply cuts to the end of the year.

The move surprised traders that had been looking for extensions only until the end of October, and global oil markets are now likely to tighten substantially this year.

A higher oil price brings with it a host of worries over inflation and the impact on central bank monetary policy, as well as what it means for a world struggling with weak demand and China’s stuttering economy.

By 03:35 ET, the U.S. crude futures traded 0.4% lower at $86.31 a barrel, while the Brent contract dropped 0.5% to $89.62. Both contracts remain close to their highest level since mid-November.

Additionally, gold futures fell 0.2% to $1,949.00/oz, while EUR/USD traded 0.2% higher at 1.0739.

(C) Reuters. FILE PHOTO: U.S. Dollar and Chinese Yuan banknotes are seen in this illustration picture taken June 14, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Ankur Banerjee

SINGAPORE (Reuters) – The dollar held near a six-month peak on Wednesday as jitters over China and global growth weighed on risk appetite, while the yen was close to a 10-month low, drawing the strongest warning since mid-August from Japan’s top currency diplomat.

The yen strengthened 0.19% to 147.42 per dollar in Asian hours, but was near 147.82, the lowest since Nov. 4 it touched earlier in the session. The Asian currency has hovered around the key 145 per dollar level for the past few weeks, leading traders to keep a wary eye on signs of intervention by Tokyo.

“We won’t rule out any options if speculative moves persist,” Japan’s top currency diplomat Masato Kanda told reporters on Wednesday.

Kanda, Japan’s vice-minister of finance for international affairs, has been the central figure in the country’s efforts to stem the sharp decline of the yen since last year.

“The comments are a warning that intervention is on the radar,” said Chris Weston, head of research at Pepperstone. However, he said the comments are unlikely to stall the yen’s descent.

Japan intervened in currency markets last year in September when the dollar rose past 145 yen, prompting the Ministry of Finance to buy the yen and push the pair back to around 140 yen.

“We are probably going to see more of such verbal intervention if yen moves are deemed to be one-sided and excessive,” said Christopher Wong, a currency strategist at OCBC in Singapore.

Against a basket of currencies, the dollar was at 104.69, not far off the six-month high of 104.90 touched overnight. Economic data from China and Europe on Tuesday fanned some fears of slowing global growth, pushing investors to scramble for the dollar.

“Dollar strength remains the dominant play,” OCBC’s Wong said. Interest rates staying higher for longer and relative U.S. growth resilience are factors that continue to underpin support for the dollar, according to Wong.

China’s yuan fell to a 10-month low against the dollar before paring some losses on Wednesday, as state banks stepped in to offer support to prevent the local currency from sinking further.

Data from the euro zone and Britain on Tuesday showed a decline in business activity last month, while a private-sector survey showed China’s services activity expanded at the slowest pace in eight months in August.

The euro was up 0.13% at $1.0736 in Asian hours, having breached a three-month low of $1.0705 overnight. Sterling was last at $1.25725, up 0.07% on the day. It also touched a three-month low of $1.25285.

Federal Reserve Governor Christopher Waller said on Tuesday the latest round of economic data gives the U.S. central bank space to see if it needs to raise interest rates again and that he saw nothing that would force a move toward boosting the cost of short-term borrowing again.

Markets are pricing in a 93% chance of the Fed holding rates steady later this month and a 55% chance of no more hikes this year, according to CME FedWatch tool.

The Australian dollar was little changed at $0.63795, after diving 1.3% on Tuesday following weak data from China.

(C) Reuters.

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Oracle, Lowe’s, NetApp, and Stryker.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Oracle pops on Barclays upgrade

Oracle (NYSE:ORCL) shares gained 2.5% Tuesday after Barclays upgraded the company to Overweight from Equal Weight and raised its price target to $150 from $126, as reported in real-time on InvestingPro.

Barclays believes Oracle has multiyear potential for strong growth with high margins as its SaaS and OCI sectors outweigh the lower growth parts of the business. The analysts wrote that the mix effect “should continue to help growth for years to come.”

The analysts also see an opportunity for its cloud operations in the AI space, particularly due to the company’s close ties with Nvidia (NASDAQ:NVDA) and its early adoption of Nvidia’s SaaS products.

The company is set to report its Q1/24 earnings on Sept 14.

Lowe’s earns an upgrade at Bernstein

Bernstein upgraded Lowe’s (NYSE:LOW) to Outperform from Market Perform on Tuesday and raised its price target to $282 from $252.

The firm now sees a confluence of positive and mutually reinforcing trends for Lowe’s that they expect to continue, saying:

We believe LOW will continue to deliver modest op margin expansion over the next 24 months, driven by the continued modest gross margin expansion of 5-10bps / year combined with stable to modestly improving OpEx % of sales.

Bernstein says it is comfortable with the home-improvement market outlook in the near term and that it sees a return to low-single-digit growth into 2024-2025 “as the housing market stabilizes.”

Two more upgrades

NetApp (NASDAQ:NTAP) shares gained more than 2% Tuesday after Susquehanna upgraded the company to Positive from Neutral and raised its price target to $100 from $62.

The analysts say they believe NetApp’s product revenue is bottoming and expect to see sequential growth, with a resurgence in year-over-year growth anticipated by mid-2024. They say this is due to the growing demand for SAN-specific AFA technology and share gains in the $18 billion SAN market.

Also on Tuesday, BofA Securities upgraded Stryker (NYSE:SYK) to Buy from Neutral and raised its price target to $315 from $310, commenting:

SYK’s message on margin upside has turned more bullish but the stock has yet to work given all the negative sentiment on medtech which we see as an opportunity now ahead of the 2024 upside.

According to the bank, Stryker’s new product cycle could contribute an additional 100-200 basis points to its revenue growth.

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(C) Reuters

Investing.com — U.S. stock futures decline as investors gauge the outlook for Federal Reserve monetary policy and digest extended supply cuts by major oil producers Saudi Arabia and Russia. Elsewhere, new data later in the session on Wednesday will provide a look into the state of the key U.S. services sector, while China’s Tencent prepares to unveil a new AI chatbot.

1. Futures edge down

U.S. stock futures pointed lower on Wednesday after a losing session marked the beginning of a holiday-shortened trading week.

By 05:24 ET (09:24 GMT), the Dow futures contract dipped by 64 points or 0.2%, S&P 500 futures lost 12 points or 0.3%, and Nasdaq 100 futures shed 67 points or 0.4%.

The main indices on Wall Street posted losses on Tuesday, while the dollar touched a six-month high and government bond yields inched up, as traders attempted to suss out the future path of interest rates.

Fed official Christopher Waller suggested that the U.S. central bank is set to keep borrowing costs steady at its policy meeting this month. He added that the probability of a so-called “soft landing” is growing, a trend that could convince the Fed to refrain from cutting rates any time soon.

The comments added fuel to speculation that U.S. interest rates may need to stay “higher for longer” in response to ongoing resilience in the broader economy.

2. Oil reverses course after touching $90

Oil prices slipped on Wednesday, but still hovered around nine-month highs, weighed down by a stronger dollar and the waning impact of new supply cuts from two major crude producers.

Saudi Arabia is due to extend its output cut of 1 million barrels per day (bpd) until the end of December, according to a report from a state news agency. Separately, Russia’s Deputy Prime Minister Alexander Novak also said in a statement that Moscow would bring down oil exports by 300,000 bpd until the end of 2023.

Tuesday’s announcements, which surprised traders looking for extensions only until the end of October, sparked a jump in international benchmark Brent crude to above $90 a barrel for the first time this year. The higher prices threatened to ignite renewed global inflation concerns that could influence central bank monetary policy.

Yet the gains were ultimately mitigated by the U.S. dollar, which is exchanging hands near a six-month peak following a string of disappointing economic data releases from China and Europe.

By 05:25 ET, the U.S. crude futures traded 0.7% lower at $86.08 a barrel, while the Brent contract dropped 0.8% to $89.34. Both contracts remain close to their highest level since mid-November.

3. U.S. services data ahead

U.S. services industry data are set to be released on Wednesday morning, giving Fed policymakers and investors alike fresh insight into the trajectory of the world’s largest economy.

The ISM non-manufacturing purchasing managers’ index is projected to come in at 52.5 in August, down from 52.7 in the prior month. A reading above 50 indicates expansion; below 50, contraction.

The figure serves as a gauge of activity in the services industry, a crucial sector that accounts for over two-thirds of the U.S. economy. At current levels, it hints at U.S. economic resilience despite an unprecedented spike in interest rates since March 2022.

Fed officials will likely be keeping a particularly close eye on any movements in service sector prices. These are typically less responsive to interest rate increases, but still play a crucial role in the central bank’s fight to cool inflation down to its 2% target. A measure of prices paid by services businesses ticked up to 56.8 in July.

4. Evergrande soars amid stimulus hopes

Shares in real estate giant China Evergrande Group (HK:3333) surged by more than 82%, leading gains in the stocks of other Chinese developers, as hopes grew that Beijing would roll out more measures to support the country’s ailing property industry.

In a commentary published on Wednesday, state-owned newspaper Securities Times backed the removal of policies that restrict property purchases in smaller cities, arguing that there has been a “significant change” in the sector’s supply and demand dynamics.

Over the past week, China has relaxed regulations on home purchases in several major cities in a bid to reinvigorate its domestic property market.

Real estate was the top performing sector on the Hang Seng Index, with Country Garden Holdings (HK:2007) and Logan Property Holdings (HK:3380) rallying by about 21% and 29%, respectively.

5. Tencent to unveil AI chatbot

Tencent Holdings Ltd (HK:0700) is gearing up to release a new artificial intelligence chatbot this week, the Chinese internet behemoth said on Wednesday, as Beijing continues to bolster its presence in generative AI.

Chinese officials approved AI chatbots for public release last month, firing the starting gun on a race among China’s tech firms to develop these automated services. Tencent peers SenseTime Group, Baidu (NASDAQ:BIDU) and ByteDance launched their own ChatGPT-like services last week.

In a social media post, Shenzhen-based Tencent featured a demo conversation that shows the chatbot helping a user draft promotional materials. The company added that its cloud division will unveil the chatbot at its upcoming Global Digital Ecosystem Summit on Thursday.

Tencent’s Hong Kong-listed shares closed 0.4% lower on Wednesday.