MARKET WRAPS
Watch For:
EU unemployment; Germany industrial production index; Italy
unemployment; trading updates from BMW, B&M European Value
Retail
Opening Call:
European shares look set to open higher Tuesday. Asian stock
benchmarks advanced; the dollar steadied; Treasury yields edged
lower; while oil and gold futures pushed higher.
Equities:
Stock futures advanced early Tuesday, tracking positive cues
from U.S. and Asian markets. Investor focus is on inflation data
due this week, including the December reading of the consumer-price
index on Thursday in the U.S. and the producer-price index on
Friday.
"This week's inflation data could determine whether last week's
pullback is a blip on the radar or something larger," said Chris
Larkin, managing director for trading and investing at E-Trade from
Morgan Stanley.
"The S&P 500 started the year with three straight down days
for just the ninth time since 1991, and jobs data showed the labor
market is still percolating," he said.
Forex:
The U.S. dollar was steady in Asia, but could weaken on U.S.
rate-cut hopes spurred by Fed officials' comments overnight.
Atlanta Fed president Raphael Bostic and Fed governor Michelle
Bowman indicated that both were satisfied that U.S. inflation is on
a steady downward path to reach the Fed's target, said Alvin T.
Tan, head of Asia foreign-exchange strategy at RBC Capital
Markets.
Bowman added that Fed rate cuts would be appropriate as
inflation approached closer to the target, Tan noted.
Bonds:
Treasury yields edged lower early Tuesday after falling for the
first time in three sessions on Monday. A December New York Fed
survey showed consumer expectations for inflation declining across
all time horizons.
"Our base case scenario is for a soft landing, in which growth
slows to just below trend, a U.S. recession is avoided, inflation
falls toward central bank targets by the second half of the year,
and the Fed cuts interest rates by 100 basis points," said Solita
Marcelli, chief investment officer for the Americas at UBS Global
Wealth Management.
"We think growth headwinds in the U.S. are unlikely to lead to
higher precautionary savings, and that inflation should fall at a
more gradual pace," Marcelli said.
"Though markets are now pricing steeper rate cuts than our
forecast, we think the Fed is trying to balance its desire to help
the economy avoid recession with labor market and core inflation
data that still suggest a need for somewhat restrictive monetary
policy."
Energy:
Oil futures edged higher in Asia after falling overnight. Saudi
price cuts on crude oil exports have fueled concerns about weak
global oil demand, but Houthi attacks on ships in the Red Sea and
oil supply disruption in Libya could prop up oil prices, Saxo
Markets said.
Investors will keep an eye on the EIA's energy outlook report,
as well as further expectations of a cut in China's RRR, to gauge
movement in oil prices, Saxo said.
Metals:
Gold prices rose early Tuesday amid better sentiment. U.S. Fed
Gov. Michelle Bowman retreated from her long-time hawkish view,
saying U.S. monetary policy is sufficiently restrictive and hinting
at her willingness to support rate cuts as inflation eases, Nanhua
Futures said.
Gold prices could continue to fluctuate as markets debate the
likelihood of the Fed lowering interest rates in 1Q, Nanhua said.
Focus is on the key U.S. inflation data due later this week.
-
Copper rose slightly, boosted by speculation of a possible PBOC
reserve-requirement-ratio cut that may support China's economic
growth and demand for the industrial metal.
Whispers are growing louder about RRR cuts in the offing, said
Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank.
Given the overhang of sluggish demand showing up in slipping PMIs
in China, it is a matter of time--probably sooner rather than
later--before Mizuho Bank's call for 50 bps-100 bps of RRR cuts is
validated, Varathan added.
-
Most iron-ore futures declined on possible position adjustments.
However, iron ore is most exposed to China's policy-easing
measures, and policymakers are likely to ramp up support for some
projects in China, which would support steel and iron-ore demand,
Citi Research said.
Citi has raised its target on the iron-ore price for up to three
months to $150 a ton from $140 a ton.
TODAY'S TOP HEADLINES
Fed's Bowman says inflation could drop without further rate
hikes
Federal Reserve governor Michelle Bowman on Monday said her
hawkish stance on monetary policy has "evolved," and she now sees
the chance that inflation could continue to come down without
further interest-rate hikes.
In remarks to the South Carolina Bankers Association, Bowman
said that if inflation continues to decline, it will eventually
become appropriate to cut rates to keep policy from putting too
much downward pressure on growth.
NY Fed: It's been years since consumers felt this good about
where inflation could go next
Americans say inflation rates will keep cooling in the year
ahead, according to Monday data offering another sign of a
brightening mood on inflation.
Looking ahead one year, consumers expect the inflation rate to
fall to 3%, according to the Federal Reserve Bank of New York.
Biden Urged to Curb China's Dominance of Older-Generation
Chips
The Biden administration needs to take stronger action to stem
China's growing dominance in making older-generation microchips
that are essential across several U.S. industries, according to the
bipartisan leaders of a House of Representatives panel.
The lawmakers' call for new efforts, including potential
tariffs, is intended to counteract an overreliance on China for
less-advanced chips, according to a letter seen by The Wall Street
Journal. Republican Mike Gallagher of Wisconsin, chairman of the
House Select Committee on the Chinese Communist Party, and Raja
Krishnamoorthi of Illinois, the committee's ranking Democratic
member, wrote to President Biden's top business and trade officials
on Friday.
PepsiCo, Grocery Giant Bicker Over Who Dumped Whom
A breakup over grocery prices got messier Monday when PepsiCo
said that it, not supermarket chain Carrefour, initiated the
split.
PepsiCo said that it had decided to stop supplying the chain's
European stores because the two sides hadn't reached an agreement
on a new contract.
France's Prime Minister Resigns After Immigration Fight Splits
Macron's Party
PARIS-France's bruising battle over immigration has cost
President Emmanuel Macron his cabinet.
On Monday, French Prime Minister Élisabeth Borne resigned after
her ranks fractured over the passage of a contentious immigration
bill that boosts authorities' power to deport foreigners and limits
access to welfare and citizenship.
Hezbollah Commander Killed as Israel Strikes Militants in
Lebanon
A senior Hezbollah commander was killed in Lebanon in what the
group said was the second recent assassination by Israel of a
militant leader there, as Israel showed it is willing to target
Iran-backed forces across the border while avoiding an all-out
war.
Hezbollah said the commander, Wissam Hassan Al-Tawil, was killed
on Monday in an Israeli attack in a village in southern Lebanon.
The Israeli military said jet fighters struck Hezbollah targets in
Lebanon after a missile was launched toward northern Israel, but
Israel didn't say if Tawil's death was related to the airstrikes or
if the commander had been targeted.
United, Alaska Find Loose Parts on Some Boeing 737 MAX 9
Jets
United Airlines and Alaska Airlines have discovered loose parts
on Boeing 737 MAX 9 jets that they have inspected after a
near-catastrophe on a flight Friday, signaling Boeing's issues go
beyond the aircraft that made an emergency landing.
U.S. air safety officials grounded the Boeing jets and are still
investigating what caused an emergency-door plug to detach from an
Alaska Airlines plane flying at 16,000 feet, leaving it with a
gaping hole.
Amazon Is Going 'Super Aggressive' on Generative AI
For cybersecurity leaders, generative artificial intelligence
evokes hopes of outsmarting relentless hackers, on one hand, and
fears of security staff being replaced by the tech on the
other.
For Stephen Schmidt, chief security officer at Amazon.com,
reality resides in the middle.
Novartis in Advanced Talks to Buy Cytokinetics
Novartis is close to clinching an acquisition of Cytokinetics
and its promising heart drug, as big pharmaceutical companies
continue to snap up fast-growing biotechs to replenish their
pipelines.
A purchase by the Swiss drug company of South San
Francisco-based Cytokinetics, which has a market value of more than
$10 billion, could be completed as soon as this week, according to
people familiar with the situation. Cytokinetics has been running a
sale process, and it is possible another suitor could re-emerge;
there also might be no deal at all.
What Nvidia Does for an Encore
How does any company follow up a year in which business doubled
and market value tripled? For Nvidia, that answer seems to be:
staying the course.
Nvidia announced its latest initiatives in videogaming and
automotive technology on Monday, ahead of the CES trade show
kicking off this week in Las Vegas. The company has long used the
annual consumer-electronics conference to showcase its products for
those two markets. The new announcements lean heavily into the
generative artificial-intelligence theme that has made the
once-niche chip maker into a household name, including new GeForce
graphic processors designed for AI-enabled PCs and laptops. Nvidia
also announced new EV makers adopting its automated-driving
system.
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Expected Major Events for Tuesday
00:01/UK: Dec BRC-KPMG Retail Sales Monitor
00:01/UK: CBI Financial Services Survey
00:01/UK: Dec Scottish Retail Sales Monitor
05:30/NED: Nov Consumer Spending
06:45/SWI: Dec Unemployment
07:00/GER: Nov Industrial Production Index
07:00/ROM: Nov International trade
07:00/DEN: Nov Balance of payments (provisional figures)
07:00/DEN: Nov External trade (provisional figures)
07:30/HUN: Nov Preliminary Industrial Production
07:45/FRA: Nov Foreign trade
07:45/FRA: Nov Balance of Payments
08:00/AUT: Oct Foreign Trade
08:00/SVK: Nov Foreign trade
08:00/SWI: Dec SNB foreign currency reserves
08:00/CZE: Dec Unemployment data
09:00/ITA: Nov Unemployment
10:00/GRE: Nov External Trade (provisional data)
10:00/CRO: Nov Foreign Trade
10:00/EU: Nov Unemployment
10:00/CYP: Nov Foreign Trade (provisional)
10:00/MLT: Nov International Trade
11:00/IRL: Nov Retail Sales Index
11:00/POR: Nov International trade statistics
11:00/IRL: Nov Industrial Production and Turnover
16:59/POL: Polish interest rate decision
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(END) Dow Jones Newswires
January 09, 2024 00:16 ET (05:16 GMT)
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