UKX FTSE 100 Index

MARKET WRAPS

Watch For:

Germany labor cost index; U.K. CBI economic forecast, Manpower UK employment outlook survey; trading updates from Siemens Energy, RWE

Opening Call:

Stock futures were little changed at the start of the week. Asian stock benchmarks were lower, weighed by Chinese equities following data over the weekend showing a deepening in deflation. The dollar and Treasury yields steadied; while oil futures rose and gold edged lower.

Equities:

European stock futures were muted at the start of a busy week of economic events, including central bank decisions from the Federal Reserve, the ECB and the Bank of England.

Friday's U.S. jobs data added to optimism that the U.S. economy is gliding toward a soft landing. Traders are pricing in rate cuts from the Fed next year, with the first coming as soon as March.

Meanwhile, euro-area inflation is falling rapidly, opening the door to ECB interest rate cuts by early 2024, said Brian Martin, head of global economics at ANZ. By early next year, interest rates will have been held sufficiently high for sufficiently long for the ECB to feel that inflation will return to target in a timely manner, he added.

ANZ expects the cuts will start in March, by which time the effects of monetary tightening will be weighing on demand, and monetary and credit aggregates are already contracting. The data is confirming an accelerating and sustained improvement in inflation.

Forex:

U.S. CPI and retail sales data due out this week are likely to be softer than consensus expectations, and may weigh on the greenback, Commonwealth Bank of Australia said.

Given this week's FOMC meeting, market participants will probably be interested in how many additional rate cuts the FOMC includes in its "dot plot" for 2024 from the current 50 bps, CBA noted.

Bonds:

Treasury yields were little changed after posting the biggest one-day jump in months on Friday on a stronger-than-expected U.S. jobs report for November.

"The employment market continues to support the idea of positive economic growth as we move into 2024," said Steve Wyett, chief investment strategist at BOK Financial. Friday's job report indicates "U.S. consumers are still supported by a healthy job market," he said.

"We think this adds to the idea of the Fed being slower to cut rates than current market pricing would indicate," Wyett said. "Overall, this is a good number for the economy ... and the Fed."

Energy:

Oil futures rose early Monday amid possible position adjustments. Some stability has emerged as Russia and Saudi Arabia recently provided verbal support, emphasizing continued efforts to stabilize global oil markets via active supply management, said Saxo Bank.

Also, the risk of an emergency OPEC+ meeting being called should crude oil prices fall further has helped to underpin markets, Saxo added.

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European oil-company investors should take advantage of oil-price volatility in 2024, JPMorgan said. While non-OPEC supply momentum looks set to balance the oil market in the first half, resilient global demand and lower inventories indicate tightening thereafter, JPM said.

"We see $70/bbl Brent as the lower end of the price range during periods of heightened volatility," the bank said, adding that OPEC unity remains intact and that more volatile periods in 2024 offer long-term investors a buying opportunity.

Metals:

Gold edged lower in Asia, with focus on U.S. CPI data and the FOMC meeting this week. The precious metal is still holding above $2,000/oz, a key short-term support level, said Fawad Razaqzada, market analyst at City Index and forex.com.

Gold has to hold this level in order to sustain its recent bullish bias, Razaqzada said. Otherwise, there could be a deeper retracement, with subsequent major support in the $1,950/oz area, which includes the 200-day average, he added.

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After a steady first nine months of the year for copper supply, miners of the industrial metal have been recently grappling with increased disruptions and production misses, Jefferies said. "Forecasted market surpluses for 2024 have been wiped out, and a deficit market is now the most likely scenario as long as the U.S. economy avoids a nasty downturn."

Since the start of the year, combined 2023 copper production guidance from miners Teck, Rio Tinto, Vale, Anglo American, First Quantum and Antofagasta has been cut by 8.0%, Jefferies said. That is based on the midpoint of guidance ranges and doesn't include the recent suspension of output guidance for First Quantum's Cobre Panama.

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Low stockpiles of iron ore at key Chinese ports appears to be a key driver of strong prices for the steel ingredient, CBA said. While stocks have rebounded 8% after recording a nadir around 105 million tons at the end of October, port inventories are at the lowest they've been at this time of year since 2016, the bank said.

"It is unusual for China's iron ore port stockpiles to have trended this low given China's iron ore imports have outpaced China's steel output growth," CBA noted.

TODAY'S TOP HEADLINES

Jerome Powell's Inflation Fight Is Succeeding, Raising Questions About Rate Cuts

When Federal Reserve Chair Jerome Powell met on an October afternoon with small-business owners in Pennsylvania, Julie Keene lamented how her family farm and food market had been blindsided by high inflation over the past two years.

"Predictability is just gone," said Keene, co-owner of Flinchbaugh's Orchard & Farm Market in Hellam, Pa. "It is very hard to operate a business in a world where there is not predictability."

This week's Fed meeting could slam brakes on year-end stock rally

The rally lifting U.S. stocks to fresh 2023 highs in the year's home stretch could be at risk if the Federal Reserve on Wednesday crushes expectations for interest-rate cuts in 2024.

U.S. central bankers and investors haven't exactly been seeing eye-to-eye about when the Fed will start easing its monetary policy, according to Melissa Brown, senior principal of applied research at Axioma.

Why Treasury Auctions Have Wall Street on Edge

The U.S. Treasury prefers its debt sales to be humdrum affairs. Lately, they are sparking fireworks in markets.

Scrutiny of Treasury auctions-whereby the government funds operations by selling the world's safest bonds to big banks and dealers-has grown alongside their size. For years, many in Washington and on Wall Street assumed that investors would buy any number of bonds the government issued, no matter the fiscal outlook. Testing that assumption: the sale of $20.8 trillion of new Treasurys in the first 11 months of the year-set to surpass 2020's record of just under $21 trillion.

SEC Probes Investment Advisers' Use of AI

The Securities and Exchange Commission is asking investment advisers how they use and oversee artificial intelligence, as agency head Gary Gensler continues to express skepticism about the technology.

The SEC's examinations division has sent requests for information on AI-related topics to several investment advisers, part of a process known as a sweep. The agency wants details on topics including AI-related marketing documents, algorithmic models used to manage client portfolios, third-party providers and compliance training, according to one such letter obtained by Vigilant Compliance, a regulatory compliance consulting firm.

China Can't Shake Deflation

SINGAPORE-Consumer prices in China fell for the second straight month, a deepening bout of deflation that shows Beijing's efforts to reignite faltering growth are falling short.

China's top leaders telegraphed Friday that more support is coming for the economy, with pledges of new fiscal stimulus and supportive central-bank policy in the months ahead.

Israel Detains Hundreds of Palestinian Men in Search for Hamas

The Israeli military is searching and detaining hundreds of Palestinian men in and around Gaza City, triggering concerns from human rights groups that prisoners are being mistreated.

The Israeli military says many of the men are militants who are surrendering, a sign that Hamas is losing control of the Gaza Strip, where intense fighting between both sides continued Sunday. But images circulating of what appear to be scores of men, stripped down to their underwear, come as international pressure mounts on Israel to abide by the rules of war and help alleviate the growing humanitarian crisis in Gaza.

Russian Airline Sues Canada Over Sanctions

TORONTO-A giant Russian cargo plane is facing another cold Canadian winter stuck in Toronto. A court battle could determine its fate.

Russian airline Volga-Dnepr has sued the Canadian government, asking a federal court to declare that Canada's sanctions against it are invalid. The court could determine what happens to the airline's massive Antonov An-124 cargo plane, one of only 26 in the world, which has been stuck in Toronto since Canada closed its airspace to Russian planes in February 2022.

Sweeping Regulation of AI Advances in European Union Deal

BRUSSELS-European lawmakers reached a political deal on regulating artificial intelligence, marking a step toward establishing a comprehensive AI law in Western countries.

The European Union's Artificial Intelligence Act would be the latest in a series of regulations the bloc has pushed forward that is expected to reverberate through the global tech industry and affect some of its biggest players. Earlier legislation from the EU set out new competition and online content rules that affect large U.S. tech companies including Meta Platforms, Apple and Google's parent, Alphabet.

Boeing Reveals the Frontrunner to Be Its Next CEO

Boeing is elevating Stephanie Pope to become its No. 2 executive, setting her up as the heir apparent to Chief Executive David Calhoun as the planemaker prepares for its next leadership transition.

Pope, who heads Boeing's services arm, is expected to be named chief operating officer as soon as Monday, according to people familiar with the matter. The three-decade Boeing veteran beat out other top executives for the role.

TikTok to Invest Over $1.5 Billion in Deal With Indonesia's GoTo Group

Bytedance's TikTok will invest more than $1.5 billion in a deal to merge its Indonesia business with GoTo Group's e-commerce platform, a move that will allow the Chinese video-sharing app to resume retail operations in the populous Southeast Asian nation.

The companies said Monday that TikTok Shop Indonesia and GoTo's Tokopedia arm will be combined under the existing Tokopedia entity, with TikTok taking a controlling stake. TikTok plans to invest more than $1.5 billion into the venture over time, they said.

Former CNN Boss Jeff Zucker Eyes Unlikely Next Role: British Media Mogul

Jeff Zucker ran NBC's "Today" show as a young executive producer and was CNN's boss for nearly a decade. Now, the television veteran is angling for a very different assignment: turn conservative British news publications into global brands.

Zucker is heading an investment group that has become the top contender to buy the Telegraph and the Spectator, a newspaper and a magazine that are both more than 150 years old.

Nasdaq Settles Alleged Iran Sanctions Violation for $4 Million

Stock exchange operator Nasdaq has agreed to pay $4 million in a settlement with the U.S. Treasury Department over alleged Iran sanctions violations.

A former Armenian subsidiary of Nasdaq allegedly processed trades and settled payments involving a sanctioned Iran-owned bank, the Treasury Department's Office of Foreign Assets Control said Friday. The transactions occurred on platforms the subsidiary provided to facilitate overnight loans and foreign exchange trading among Armenia's banks.

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Expected Major Events for Monday

00:01/UK: CBI Economic Forecast

00:01/UK: Nov UK Regional PMI

00:01/UK: Dec Rightmove House Price Index

07:00/GER: 3Q Labour cost index

07:00/DEN: Oct Balance of payments (provisional figures)

07:00/DEN: Oct External trade (provisional figures)

07:00/NOR: Nov PPI

07:00/NOR: Nov CPI

07:00/ROM: Oct International trade

07:00/DEN: Nov CPI

07:00/TUR: Oct Employment / Unemployment

07:00/TUR: Oct Balance of Payments

07:00/TUR: Oct Industrial Production Index

08:00/SVK: Oct Industrial production

08:00/CZE: Nov CPI

08:00/CZE: Oct Import & export price indices

10:00/CYP: Oct Foreign Trade (provisional)

10:00/MLT: Oct International Trade

11:00/POR: Oct International trade statistics

15:59/UKR: 3Q GDP

15:59/UKR: Nov CPI

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

December 11, 2023 00:16 ET (05:16 GMT)

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