MARKET WRAPS
Watch For:
Flash PMI for E.U., Germany, France, U.K.; trading updates from
Alstom, Tod's, ASML Holding, Swedbank, X5 Retail Group, easyJet,
Fresnillo, Tullow Oil
Opening Call:
Shares may open slightly higher in Europe ahead of company
earnings and manufacturing PMI. In Asia, stock benchmarks were
mixed; Treasury yields fell; the dollar weakened; oil fell, while
gold was barely changed.
Equities:
European shares are poised to tick higher on Wednesday as the
market waits for earnings reports, as well as a raft of economic
data.
TD Ameritrade has its eyes on Thursday's U.S. macroeconomic
numbers on durable-goods orders, GDP growth and jobless-benefit
claims data. On Friday, the numbers to watch include the Federal
Reserve's preferred inflation gauge, the personal-consumption
expenditures price index, along with numbers on personal income and
spending.
If the data remain resilient, "it really complicates that
timetable" investors may have for when interest rate cuts will
arrive, it said.
The earnings season will go into high gear next week, when about
23% of the S&P 500 will present their numbers.
Forex:
The dollar lost strength in Asia ahead of U.S. economic activity
and inflation data.
Markets expect durable goods orders and GDP to slow on Thursday,
with jobless claims edging higher. PCE inflation, due Friday, is
forecast to cool a little. Meanwhile, markets now see the Fed
starting to cut interest rates in May and no longer in March.
Meanwhile, Morgan Stanley Research recommends investors buy
two-week EUR/GBP calls to benefit from valuations.
Short EUR/GBP positions "appear stretched" and EUR/GBP implied
volatility--a measure of options pricing--"seems complacently
underpriced" given upcoming European Central Bank and Bank of
England meetings and important economic data.
EUR/GBP is also uniquely sensitive to rate differentials and
insensitive to risk appetite, it says. It cautions that the window
for this trade is narrow, however, as sterling could rise after the
Feb. 1 Bank of England meeting if focus switches to fiscal
policy.
Bonds:
Treasury yields declined ahead of U.S. GDP and inflation data
this week.
Traders await fresh information that may challenge the current
consensus on the economy's trajectory and Federal Reserve monetary
policy.
Markets are pricing in a 97.4% probability that the Fed will
leave interest rates unchanged at a range of 5.25%-5.50% at its
meeting next Wednesday, according to the CME FedWatch Tool.
The chance of a 25-basis-point rate cut by March is now seen at
46.2%, down from 75.6% a month ago. The central bank is mostly
expected to take its fed-funds rate target back down to at least
4%-4.25% by December.
Energy:
Oil fell after earlier slight gains, as traders continue to
monitor ongoing tensions in the Middle East and weather-related oil
production disruptions in North Dakota.
"Fundamentally, threats to supply have been elevated for months
amid the Israel-Hamas conflict in the Middle East, but worries
about fading consumer demand had kept prices subdued near the low
end of the 2023 trading range for much of the fourth quarter," said
Sevens Report Research.
Oil market dynamics started to change over the last week, it
said.
"The combination of cold weather knocking out a big portion of
oil production in North Dakota since late last week, and news of an
apparent Ukrainian drone attack on a Russian fuel export that
temporarily halted operations at the facility this week, have
tipped the fundamental scales in favor of the bulls for the very
near term."
Metals:
Gold was trading steadily, supported by buying interest from
commodity trading advisers, also known as speculators.
There appears to be CTA buying activity, said TD Securities, in
a research note.
The brokerage reckons that CTAs are poised to repurchase their
recently liquidated positions in the precious metal above the
$2,000/oz level.
---
Copper prices were higher as supply-side issues came back into
focus.
Severe drought conditions at the Panama Canal and concerns about
attacks on vessels at the Suez Canal have affected the red metal's
transit, Galaxy Futures said.
China's and the U.S.'s copper imports have fallen as a result,
it said.
Transportation disruptions will likely continue this year and
weigh on copper supply in the first half, it added.
---
Iron ore prices rose amid hopes of more stimulus from China.
Investor sentiment was also boosted by stronger demand ahead of
the Lunar New Year holiday, ANZ Research said.
It reckons that Chinese Premier Li Qiang's recent calls for more
rigorous measures to stabilize capital markets could be positive
for the economy.
That could help offset rising supplies, as exports from
Australia and Brazil have shown signs of a recovery in recent
weeks, it added.
TODAY'S TOP HEADLINES
Tech's 'Magnificent Seven' Stocks Are Back on Top
Big tech is powering the stock market higher. Again.
The largest tech stocks, which dominated the stock market last
year, have once again rallied. The group has pulled the S&P 500
back to record highs for the first time in two years. Investors are
once again pouring money into tech shares in a bid to keep
pace.
U.S. Carries Out Airstrikes Against Iranian-Backed Group and Its
Facilities in Iraq
WASHINGTON-The U.S. conducted strikes against Iran-supported
militants, this time in Iraq after the group attacked American
troops for a second time Tuesday, which amounted to one of the
strongest responses thus far to hundreds of recent attacks against
American forces in Iraq and Syria.
The airstrikes in Iraq come a day after the U.S. struck what it
said were targets in Yemen controlled by the Tehran-backed Houthi
rebels.
Hamas Open to Releasing Some Israeli Hostages for Pause in
Fighting, Mediators Say
DUBAI-Officials of Palestinian militant group Hamas have told
international mediators that they are open to discussing a deal to
release some of the kidnapped Israelis they are holding hostage in
exchange for a significant pause in fighting, Egyptian officials
said Tuesday.
The overture marks a significant shift by Hamas, which for weeks
has insisted it would only negotiate on hostages as part of a
comprehensive agreement that would lead to a permanent end to the
war that has engulfed Gaza since Hamas militants attacked southern
Israel on Oct. 7. Israel says 1,200 people were killed in the
attacks and over 240 taken hostage.
Small-cap stocks had a rough start to 2024 - but could shine the
rest of this year, says stock market's biggest bull
Small-cap stocks have had a rough start to 2024 so far, but they
could still shine over the rest of this year, according to Tom Lee,
an equity bull and head of research at Fundstrat Global
Advisors.
Lee expects the large-cap benchmark S&P 500 SPX to rally to
5,200 points by the end of this year, more than 7% above its
current level. But he also expects the Russell 2000 RUT, a
small-cap equity gauge, to reach as high as 3,000 points by the end
of 2024. That's more than 50% above the index's current level.
SAP Launches EUR2 Billion Restructuring Affecting 8,000 Jobs
Amid AI Push
SAP will undertake a multi-billion euro restructuring this year
that will affect 8,000 jobs as it ratchets up its focus on
business-related artificial intelligence.
The German business-software company said on Tuesday that the
majority of the 8,000 positions affected by the restructuring are
expected to be covered by voluntary leave programs and internal
re-skilling measures.
Rio Tinto Inks Power Deal With European Energy for Giant
Australia Solar Farm
Rio Tinto said Wednesday it has agreed to buy electricity from
the planned Upper Calliope solar farm in eastern Australia to power
its Gladstone operations, underpinning development of Australia's
largest solar farm and marking another step toward curtailing its
carbon emissions in the years ahead.
The Anglo-Australian miner, which is seeking to halve its global
Scope 1 and 2 carbon emissions this decade, said it has signed a
power purchase agreement with developer European Energy to buy all
power generated from the more-than 1 gigawatt Upper Calliope solar
farm for 25 years.
Iranian Military Technology and Advisers Aid Houthi Attacks in
Red Sea, Officials Say
Iran is sending increasingly sophisticated weapons to its Houthi
allies in Yemen, Western officials and advisers say, enhancing
their ability to attack merchant vessels and disrupt international
commerce despite weeks of U.S-led airstrikes.
The Houthis, once derided as a ragtag militia operating in
Yemen's arid backcountry, have emerged as one of Iran's most
capable proxies, these officials and analysts say, due to the flow
of weapons from Tehran-and their own homegrown ingenuity.
EU Probes Lufthansa's Stake Acquisition in ITA Airways
The European Union launched an in-depth investigation into
Deutsche Lufthansa's acquisition of a minority stake in ITA
Airways, the Italian carrier formerly known as Alitalia, saying the
deal could stifle competition.
The European Commission, the EU's executive arm, said Tuesday
that the deal could hinder competition on short-haul routes
connecting Italy with countries in Central Europe as well as on
several long-haul routes between Italy and the U.S., Canada, Japan
and India.
EBay to Lay Off 9% of Full-Time Workforce
EBay will lay off about 9% of its full-time workforce, part of
efforts to boost performance at a time of rising competition and
softer consumer spending.
The San Jose, California-based online marketplace will lay off
about 1,000 full-time employees, Chief Executive Jamie Iannone said
in an internal memo posted on the company's website late Tuesday.
He said it would also scale back its contracts with other
employees.
United Puts Boeing on Notice. It's Looking at Other Jets.
Boeing stock took a hit after negative comments about another
737 MAX version from United Airlines-a key MAX customer-on
Tuesday.
Boeing's customer sounds frustrated. That's fair. Boeing has
created a lot of problems for its customers recently. But customers
don't have a lot of alternatives for Boeing jets.
Write to singaporeeditors@dowjones.com
Expected Major Events for Wednesday
06:00/FIN: Dec PPI
07:00/DEN: Jan Business tendency survey
08:00/CZE: Jan Business cycle survey (consumer/business
confidence)
08:15/FRA: Jan France Flash PMI
08:30/GER: Jan Germany Flash PMI
09:00/EU: Jan Eurozone Flash PMI
09:00/POL: Dec Unemployment
09:00/ICE: Dec Labour Force Survey
09:30/UK: Jan Flash UK PMI
11:00/UK: Jan CBI Industrial Trends Survey
13:00/POL: Dec Broad money M3
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(END) Dow Jones Newswires
January 24, 2024 00:16 ET (05:16 GMT)
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