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MARKET WRAPS

Watch For:

EU industrial production; Germany balance of payments; Italy labor cost index; UK monthly GDP estimates, trade, index of production; trading update from Inditex

Opening Call:

European stock futures were little changed as traders await the Fed decision later today. Asian stock benchmarks were largely lower; the dollar and Treasury yields steadied; while oil futures fell slightly and gold was steady.

Equities:

Stock futures tread water early Wednesday ahead of the Federal Reserve's final policy decision for the year. Investors will be attuned to Fed Chair Jerome Powell's press conference for insights into when the central bank might begin cutting interest rates.

"The most important thing for the market now is to gain clarity on the Fed's thinking about the rate cuts," said Quincy Krosby, chief global strategist for LPL Financial.

Fed officials haven't said they are done lifting rates but are increasingly confident that they won't need to raise them more to tame inflation. As of Tuesday, traders see a 50% probability that the Fed will begin cutting rates in May.

"What the market wants to hear from the Fed is more confirmation that a rate cut is conceivable in 2024," Krosby said.

Forex:

The dollar was steady in Asia ahead of the Fed decision later, where it is widely expected to leave rates on hold. Beyond this decision, market participants will also monitor the Summary of Economic Projections as well as Fed Chair Powell's press conference, said MUFG Bank.

Powell will likely want to maintain optionality heading into 2024 and, as such, could still maintain a hawkish tone, MUFG added.

Bonds:

Treasury yields were little changed after the policy-sensitive 2-year Treasury rate finished at its highest level this month on Tuesday after consumer inflation data showed the U.S. economy made little progress on inflation.

"Markets struggled with the initial reaction" to Tuesday's CPI report, said TD Securities. "This left investors focused on the details of the report, with strength in the services ex-shelter and shelter components finally driving the modest bearish reaction in rates."

Energy:

Oil futures fell slightly in Asia, weighed by more signs of ample supply. The weekly average of Russia's seaborne crude oil exports has hit the highest level since early July, ANZ said. Also, the EIA has raised its 2023 forecast for U.S. crude oil supply in its latest short-term energy outlook report, ANZ added.

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Fitch Ratings' 2024 outlook for the global oil and gas sector is neutral, "supported by high prices and fairly strong earnings." The agency expects oil prices to remain high next year, given continued curtailments by OPEC+, geopolitical risk and slower production in the U.S.

But slow demand growth and spare capacity "should be sufficient to absorb potential shocks," Fitch said. Most companies will maintain or decrease capex, and producers will continue to complement dividend payments with share buybacks, according to Fitch.

Metals:

Gold was little changed early Wednesday. Price movements may be limited ahead of the FOMC decision later today.

Although market participants expect another Fed rate-increase pause and a possible rate cut in May 2024, the U.S. central bank may not satisfy investors with a dovish tone, said CMC Markets.

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Copper prices declined as China's annual economic work conference disappointed investors who were hoping for signals on fiscal stimulus measures, ANZ said. Authorities instead emphasized technological innovation, digital economy and AI.

However, losses may be contained amid continued supply-side issues following the recent shutdown of First Quantum Minerals' Cobre mine in Panama and mining giant Anglo American's reduced production, ANZ added.

TODAY'S TOP HEADLINES

Where Are Interest Rates Headed? What to Expect From the Fed Meeting

Federal Reserve officials are set to hold interest rates steady this week at a 22-year high and will likely project cutting them next year.

Still, they won't declare an end to rate hikes this week, even though they are growing more convinced that they have done enough to bring inflation down.

China Turns the Tables on Wall Street

China is upending how the international financial system handles debt crises in the developing world. Wall Street isn't happy.

Large bond fund managers cried foul last month when China blocked their deal to salvage investments in defaulted Zambian debt. The smackdown came just weeks after Chinese officials brokered a private debt restructuring with Sri Lanka, outmaneuvering Western governments that were trying to do the same.

ADB Raises Growth Forecasts for Asia Despite Continued Headwinds

The economic outlook for Asia seems upbeat despite global challenges, the Asian Development Bank said as it raised growth forecasts for the region.

Citing resilient economic activity in the face of persistent headwinds, the Manila-based multilateral bank now expects developing Asia to record growth of 4.9% for 2023. That is up from the 4.7% it had projected in September. It kept its 2024 forecast for the area, which comprises 46 of its members, including China, South Korea and India, at 4.8%.

Yellen Says U.S. Economy on Path to Soft Landing

WASHINGTON-Treasury Secretary Janet Yellen said the U.S. economy is on the path toward taming inflation without a deep economic slowdown, achieving a so-called soft landing.

"To me a soft landing is the economy continues to grow, the labor market remains strong and inflation comes down. And I believe that's the path we're on," Yellen said Tuesday at The Wall Street Journal's CEO Council Summit.

BAE Systems to Keep Managing U.S. Ammunition Plant in $8.8 Billion Deal

BAE Systems won a new 10-year contract worth $8.8 billion to manage the U.S. Army's main ammunition plant in Tennessee as efforts continue to surge production of artillery shells, missiles and other weapons, the Pentagon said on Tuesday.

The UK defense company's U.S. arm has overseen the Holston Army Ammunition Plant in Kingsport since 1999. It beat out competing bids from General Dynamics and Day & Zimmerman, according to people familiar with the Army's decision. Both operate other Army ammo facilities.

Houthi Rebel Attacks Rattle Global Shipping

Yemen's Houthi forces have attacked several commercial ships crossing through the Bab el-Mandeb strait in recent days, creating a new front in the battle between Israel and Hamas and complicating efforts by the U.S. and its allies to secure the critical shipping lane.

Houthi rebels claimed responsibility on Tuesday for a strike on the Norwegian tanker Strinda a day earlier off Yemen's coast, as the Iranian ally escalates attacks to disrupt the flow of cargoes in response to fighting in Gaza. The elevated risk of moving cargoes through the region has resulted in higher costs for shippers and also prompted some countries to rethink security measures to allow safe passage.

U.K. Sets Up New Office to Help Enforce Sanctions Against Russia

The U.K. government is establishing a new unit that will focus on stopping companies from evading export controls, particularly those against Russia.

The Office of Trade Sanctions Implementation will be responsible for the civil enforcement of trade sanctions and will have the power to issue civil monetary penalties on companies. The U.K. Department of Business and Trade intends to launch the OTSI next year.

Israel Begins Pumping Seawater Into Hamas's Gaza Tunnels

Israel's military has begun pumping seawater into Hamas's vast complex of tunnels in Gaza, according to U.S. officials briefed on the Israeli military's operations, part of an intensive effort to destroy the underground infrastructure that has underpinned the group's operations.

The move to flood the tunnels with water from the Mediterranean, which is in an early stage, is one of several techniques Israel is using to try to clear and destroy the tunnels.

In Dueling Remarks, Biden and Netanyahu Spar Over Gaza's Future

President Biden and Israel's Prime Minister Benjamin Netanyahu clashed Tuesday over who should govern Gaza after the war, in a remarkable public display of differences emerging between the two leaders over the conflict.

Speaking during a fundraiser in Washington, Biden made his toughest remarks since the war began about Netanyahu's government. He suggested that its hard-line stance has prevented Netanyahu from accepting the Biden administration's postwar plan to have the Palestinian Authority take over Gaza, and that it would also obstruct progress toward political, economic and security arrangements that could spawn a separate Palestinian state-an outcome the U.S. president sees as a long-term solution to the conflict.

Netflix Releases Full Viewership Data for First Time

Netflix released its first-ever engagement report, revealing the viewership of its top programming through the first six months of the year.

The streaming giant has previously declined to release specific data on viewership of all its programs. The engagement report released Tuesday reports hours viewed for over 18,000 titles, including Netflix originals and licensed content.

Apple, Google Get Billions From Their App Stores. That's Now Under Threat.

Monday's court ruling that Google has operated an illegal app-store monopoly is the latest in a mounting series of threats to the $500 billion-a-year app-store economy, which has evolved into a profit machine for Apple and Google that helped define the smartphone era.

A jury unanimously sided with Epic Games, saying that Google had harmed the videogame maker by maintaining an illegal monopoly. Google said it plans to appeal the verdict and stands by its business model. In a separate case that concluded in 2021, a federal judge largely ruled against Epic even as she ruled that Apple must allow third-party software makers to steer customers to payment options within their own apps. The outcome might ultimately be decided by the Supreme Court.

Apple Makes Security Changes to Protect Users From iPhone Thefts

Apple is rolling out a new security setting for iPhones following Wall Street Journal reporting about a vulnerability that allowed thieves to break into victims' devices and upend their lives.

The Journal reported on a nationwide spate of thefts where criminals used iPhone owners' passcodes to change their Apple accounts, access saved passwords, steal money and lock them out of their iCloud-stored photos and videos. Thieves in New York, Chicago, New Orleans, Minneapolis and other cities watch iPhone owners tap in their passcodes before stealing the targets' devices.

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Expected Major Events for Wednesday

00:01/UK: Nov Scottish Retail Sales Monitor

06:00/FIN: Oct Balance of Payments

07:00/UK: Oct Index of production

07:00/UK: Oct UK trade

07:00/UK: Oct Index of services

07:00/UK: Oct Monthly GDP estimates

07:00/ROM: Nov CPI

07:00/ROM: Oct Industrial production

08:00/SVK: Oct Employment and average monthly wage in selected branches

08:00/SVK: Oct Turnover in selected branches of economy, incl Industry & Construction

09:00/EU: Nov Long term interest rates statistics

09:00/ITA: 3Q Labour Cost Index

09:30/UK: 3Q Business Finance Review

10:00/EU: Oct Industrial Production

11:00/FRA: Oct OECD Harmonised Unemployment Rates

12:30/UK: Nov NIESR Monthly GDP Tracker

16:59/GER: Oct Balance of Payments

16:59/AUT: Dec OPEC Monthly Oil Market Report

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(END) Dow Jones Newswires

December 13, 2023 00:16 ET (05:16 GMT)

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