MARKET WRAPS
Stocks:
European equities edged lower on Monday, at the start of a busy
week of data and other key events that include the latest Federal
Reserve minutes and the UK Autumn Budget Statement.
Stocks on the Move
Bayer shares lost around a fifth of their value after the
company stopped a late-stage study for a cardiovascular drug early,
due to lack of efficacy, and was ordered to pay $1.6 billion in a
lawsuit relating to its Roundup weedkiller.
The news underscored the challenges Bayer's two largest
businesses face as the company weighs options to overhaul its
corporate structure.
Stocks to Watch
The main uncertainty for Maersk in 2024 is the rising trend in
container shipping freight rates, AlphaValue said, as it downgraded
the stock to add from buy and lowered the target price to DKK12,105
from DKK13,951.
New vessels and low scrapping has led to overcapacity since the
beginning of 2H 2023, and while Maersk saw contract rates continue
to be positive in the third quarter, this will disappear
progressively.
The company is focused on cost reduction and lower capex in
2023-24, while the return to shareholders should be much lower than
during the boom years, AlphaValue said.
"The share price has returned a negative performance
year-to-date and there is no trigger for a rebound in the short
term."
Major iron-ore producers, such as Rio Tinto and BHP, have driven
the sell-side turning bullish on the mining sector, Citi said.
"Iron ore--which is a key earnings driver--has increased 10% in
the past six months, taking stock prices of the iron-ore heavy
miners along with it," Citi said.
Over the past six-to-nine months, stock ratings on miners have
changed in favor of buy ratings with 55% of analysts recommending
buy and 4% sell, from 50% and 12% respectively in April, Citi
added.
"It would appear as though the upward moves in equity prices are
already a few steps ahead of consensus ratings and target price
upgrades."
Economic Insight
Both the European Central Bank and the Federal Reserve could
keep interest rates high for long as economies weather the impact
of rate hikes well, despite slowing down somewhat, DNB Asset
Management said.
"Economies have proved resilient to higher rates and labor
markets are still quite tight, indicating that rates may need to be
kept at elevated levels for some time to come."
The first rate cuts could come in the second half of 2024, but
it is possible that rates could remain at present levels for the
whole year, DNB said.
U.S. Markets:
Microsoft stock jumped premarket after the company said Sam
Altman would join to lead a new advanced artificial-intelligence
research team.
The OpenAI board fired Altman as chief executive last Friday and
named a former chief executive of Twitch as interim CEO.
For investors, the AI news will continue on Tuesday, when Nvidia
is due to publish results. Its stock rose premarket.
In other market news:
Stock futures inched up along with Treasury yields, with the
10-year yield above 4.45%.
Forex:
The dollar extended its retreat on speculation that interest
rates have peaked, hitting two-and-a-half-month lows against a
basket of currencies including the euro, but Swissquote said
selling of the currency may be set for a pause.
"The U.S. dollar index flirts with oversold conditions and tests
critical 200-day moving average support, indicating a potential
pause in the ongoing dollar selloff absent fresh news."
USD/JPY's medium-term uptrend since mid-January is in jeopardy ,
based on technical analysis, Oanda said.
USD/JPY is trading below its previous upward-sloping 20-day and
50-day moving averages after a bearish move on Nov. 13, while its
daily relative strength indicator has triggered a bearish breakdown
of momentum below the 50 level.
Bonds:
Italian government bonds outperformed eurozone peers after
Moody's affirmed Italy's Baa3 rating, as broadly expected, while it
raised the outlook to stable from negative.
"The decision to change the outlook to stable from negative
reflects a stabilization of prospects for the country's economic
strength, the health of its banking sector and the government's
debt dynamics," Moody's said.
Morgan Stanley Research said the outlook upgrade favors some
further short-term tightening dynamics for Italian government
bonds.
"Nevertheless, given the current traded levels, further upside
in the 10-year BTP-Bund spread could be limited to the 160/165bp
range," Morgan Stanley said.
"Moody's decision added to several other factors that were
behind the recent outperformance of BTPs," including a rebound in
the performance of risky assets; the strength of iTraxx indices and
the fact that the ECB didn't discuss quantitative tightening on the
PEPP at the October meeting, Morgan Stanley added.
Federated Hermes agrees with Moody's updated view on Italy. "The
best way to capitalize on this positive development for Italy would
be for the government to renew its efforts to agree on the new
stability pact and future governance of the Euro area."
Investors could consider switching into Finland's 3% September
2033 government bond at Tuesday's auction from the 10-year Irish
peer to benefit from better carry and relative supply, Danske Bank
Research said.
Energy:
Oil futures pushed higher with all eyes on this weekend's OPEC
meeting in Vienna.
Prices fell for the fourth week in a row last week, despite
seeing a 4% bounce on Friday. "The recent weakness has increased
noise over what OPEC+ will decide to do at its meeting on Nov. 26,"
ING said.
It expects Saudi Arabia and Russia to continue cutting supply
into early 2024, but the wider OPEC+ group may also consider
cutting.
"A deeper group cut combined with the Saudis and Russians
rolling over their voluntary cut would be more than enough to
ensure that the surplus currently expected in 1Q24 disappears."
Metals:
Base metals were mixed and gold lower as worries about the
global economy added pressure to markets.
BMI downgraded its 2024 price outlook for aluminum to $2,400 a
ton from $2,500 a ton amid weak demand.
"The sluggish growth of the global economy is expected to weigh
on aluminum demand in 2024, capping the upside to aluminum prices,"
BMI said.
However, prices should rise from current levels, with demand
growth expected to outstrip supply.
EMEA HEADLINES
Julius Baer Sees Lower Net Profit on Credit Provisions, Higher
Taxes
Julius Baer Gruppe expects a net profit for 2023 below last
year's level due to a rise in credit provisions and an increased
tax rate, but recorded net new money inflows until October.
The Swiss private-banking group said Monday that it booked
valuation adjustments of 82 million Swiss francs ($92.6 million) on
its loan book, of which CHF70 million was against its credit
portfolio after Oct. 31.
This Coal Giant Now Wants to Get Out of Coal
Glencore Chief Executive Gary Nagle made his name running the
commodity giant's sprawling coal operations. Now he's leading an
effort to get the company out of coal altogether.
Glencore this past Tuesday agreed to a multibillion-dollar deal
that will eventually rid it of its coal mines, a move that
represents the company's biggest strategic shift in years. That
leaves it to focus on bolstering its position as a major supplier
of the metals needed for electric-vehicle batteries and other green
technologies.
GLOBAL NEWS
Stock market surges toward 2023 high. Will holiday shoppers put
it over the top?
U.S. stocks have jumped back near to their summertime highs, a
big rebound as investors enter the holiday season with Black Friday
just days away.
The shopping frenzy expected on Friday, the day after
Thanksgiving, kicks off a spending spree for the holidays that
could help buoy stocks after their surge this month.
China Keeps Benchmark Lending Rates Steady
China kept its benchmark lending rates steady after the
country's central bank kept its key policy rates unchanged earlier
this month.
The one-year loan prime rate was maintained at 3.45% while the
five-year LPR was retained at 4.2%, the People's Bank of China said
in a statement Monday.
Some experts balk at talk that Fed must cut rates soon if
inflation keeps coming down
Over the summer months, as reporters and the markets were
pondering how many more times the Federal Reserve would hike
interest rates this year, New York Fed President John Williams
mentioned one reason the central bank might actually start cutting
rates in 2024.
In an interview, Williams explained that, assuming inflation
comes down, if the Fed doesn't cut interest rates at some point,
then real - or adjusted-for-inflation - interest rates will go up
and up and up.
Israel, Hamas Close In on Hostage Deal Amid Mounting Scrutiny of
Gaza Death Toll
Israel and Hamas are closing in on an internationally brokered
deal to pause fighting and free some of the roughly 240 hostages
taken by the militant group, officials close to the talks said,
amid heightened scrutiny of the civilian toll of Israel's invasion
of Gaza.
The hostage talks, brokered by Egypt, Qatar, and the U.S., have
moved in fits and starts for weeks and could break down again. But
they represent the most active channel of diplomacy since Hamas's
Oct. 7 attacks and the launch of an Israeli military campaign that
has claimed more than 13,000 lives, more than half of them women
and children, according to health authorities in the Hamas-run Gaza
Strip.
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(END) Dow Jones Newswires
November 20, 2023 05:29 ET (10:29 GMT)
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