MARKET WRAPS
Watch For:
ECB interest rate decision; U.K. Consumer confidence survey;
France Monthly business survey, unemployment; Germany Ifo Business
climate index; trading updates from Nokia, SEB, LVHM,
STMicroelectronics, Givaudan, Salvatore Ferragamo, Sasol, Fuller
Smith & Turner, Britvic, St. James's Place, RS Group,
Intermediate Capital Group
Opening Call:
Shares may open slightly lower in Europe ahead of the European
Central Bank rate decision. In Asia, stock benchmarks were broadly
higher as investors digest China PBOC's RRR cut; Treasury yields
broadly declined; the dollar strengthened; oil gained, while gold
edged lower.
Equities:
European stock futures were tracking lower early Thursday ahead
of the ECB meeting outcome and corporate earnings reports.
U.S. stock indexes finished mixed on Wednesday, with the S&P
500 eking out a fourth consecutive all-time high as strong U.S.
economic data was weighing on investors' expectations for multiple
interest-rate cuts this year by the Federal Reserve.
Focus is now on the first estimate of fourth-quarter U.S. GDP
data due later in the day.
"We are in a bit of a FOMO, or fear-of-missing-out,
environment," said Mark Neuman, founder of Atlanta-based
Constrained Capital.
"People are excited about the technology sector, and the returns
on the share prices of the Magnificent Seven are suggesting that's
the right trade. Now other people are fearing they are going to
miss the next leg up."
Forex:
The dollar gained in Asia.
A challenging global growth outlook is expected to remain
supportive for the U.S. dollar in the near term but a bigger rally
isn't likely, MUFG's analysts said.
"The dollar's ability to stage a bigger rally should be
curtailed," the analysts said.
They point to slowing U.S. inflation, the European Central
Bank's plan not to cut rates until the summer, and to the Bank of
Japan's increased confidence that their inflation target will be
met.
China PBOC's RRR cut and a possible stabilization package that
was recently reported by media should offer some short-lived
support for macroeconomic sentiment toward China, Westpac Strategy
Group said, adding that this could be a short-term USD
headwind.
Bonds:
Treasury yields were broadly lower ahead of today's U.S. GDP
data and inflation data due Friday.
Wall Street Journal surveys with economists show expectations of
a slowdown in durable goods orders and GDP growth, while weekly
jobless claims are expected to accelerate a bit.
The data are likely to swing yields, as markets try to guess
when the Fed will start cutting rates.
Energy:
Oil futures edged higher amid lingering geopolitical
tensions.
In the short term, attacks in parts of the Middle East may lead
to enough disruption and uncertainty that an oil-price pop could
occur, Citi Research analysts said.
These tensions could support oil prices, the analysts said, and
predict Brent crude oil averaging $80/bbl in the first quarter.
Metals:
Gold was slightly weaker in Asia but lingering prospects for
rate cuts by global central banks may support.
The precious metal continues to hold above $2,000/oz, Oanda
said, adding that this may be a sign that traders remain confident
that central banks could be compelled to lower rates soon and
multiple times throughout the year.
--
Copper prices edged lower after rising overnight on China PBOC's
plan to cut reserve ratio requirement by 0.5 percentage points to
boost liquidity in its banking sector. The move will inject CNY1
trillion of long-term liquidity into the market.
The better-than-expected economic activity in the U.S. also
helped boost sentiment, ANZ analysts said.
However, there are still broad concerns over supply disruptions
in the base-metals sector, the analysts added.
--
Iron-ore futures were higher in Asia amid positive sentiment
boosted by China's planned RRR cut, ANZ Research analysts said.
Iron-ore prices rallied more than 2% overnight as investors are
hoping to see more construction activities in China, they said.
However, prices may be weighed by current weak demand and higher
inventories, they added.
TODAY'S TOP HEADLINES
ECB Plays Down Rate Cuts. Like the Fed, It's Expected to
Pause.
The European Central Bank will probably keep interest rates
unchanged on Thursday. Like the Federal Reserve, the big question
is when it will consider cuts.
The 20 nations sharing the euro are enjoying historically low
unemployment rates. But the growth outlook is weak, and rapidly
slowing inflation will soon put the pressure on the ECB to lower
borrowing costs.
The U.S. Economy Could Surprise Again. Watch the GDP
Numbers.
The U.S. economy grew at a slower but solid clip in the final
three months of 2023, capping a robust year if economists are
correct in their predictions.
Forecasters across the board expect the seasonally adjusted
annual rate of gross domestic product in the fourth quarter to come
in lower than the third quarter's 4.9% final reading. That growth
marked a steep acceleration from the second quarter's 2.1% increase
and took many by surprise.
The Fed Risks Getting Caught Up in Politics, Whatever It
Does
The problem with being independent of politics is that
appearances matter. You don't have to just be independent, you must
also appear to be independent-even if that changes what you might
otherwise do.
Many investors think the Federal Reserve might be pushed to do
exactly that, lowering interest rates in March to get the
rate-cutting cycle started before the election campaigns really get
going.
Economy revs up in early 2024, S&P finds. 'Soft landing' in
sight?
The numbers: The U.S. economy got off to a good start as growth
sped up in January a pair of S&P business surveys showed,
indicating a recession still appears far off.
The S&P flash U.S. services PMI climbed to a seven-month
high of 52.9 in January from 51.4 in the prior month, S&P said
Wednesday.
Israel Builds Buffer Zone Along Gaza Border, Risking New Rift
With U.S.
TEL AVIV-Beginning last November, an Israeli soldier and members
of his reserve unit worked day after day in a northern section of
the Gaza Strip to create a wasteland.
Their orders were to clear a 1-kilometer-wide area along the
border, the soldier said, as part of an Israeli plan to construct a
security zone just inside Gaza-to which Palestinians would be
barred entry.
Swiss Financial Regulator Appoints European Central Bank
Executive as Head
Swiss financial regulator Finma appointed European Central Bank
executive Stefan Walter as its new head.
The hiring of 59-year-old Walter, who will take over the chief
executive role on April 1, follows criticism of the regulator over
its handling of the collapse in March of Credit Suisse. Days before
Credit Suisse's downfall, the regulator said that the bank was
meeting its capital and liquidity requirements and that problems at
the time in the U.S. financial sector didn't pose a direct
contagion risk.
The Middle East Crisis Is Starting to Weigh on the Economy
Europe's economy is beginning to feel the pain from supply-chain
disruptions caused by the crisis in the Middle East.
Data released on Wednesday showed businesses had to wait longer
for parts to arrive in January after attacks by Yemen-based Houthi
rebels on cargo ships in the Red Sea disrupted freight routes from
Asia.
FAA Puts Limits on Boeing 737 Output, Clears Path for Grounded
Jets to Fly
U.S. air-safety regulators on Wednesday put limits on Boeing's
production of 737 MAX jets, but cleared the way for grounded jets
to resume flying after airlines complete inspections.
Most of Boeing's MAX 9 jets were grounded on Jan. 6, a day after
a near-catastrophe on an Alaska Airlines flight. A door plug ripped
away from the plane shortly after it took off, leaving a gaping
hole the size of an emergency exit in its side.
Tesla Projects Slower Growth in 2024 as EV Demand Softens
Tesla warned of "notably" slower growth in 2024, and its profit
margin took a hit in the fourth quarter, signaling more uncertainty
ahead for the world's most valuable automaker and the broader
electric-vehicle industry.
Chief Executive Elon Musk also reiterated his desire for greater
control over the electric-car company, saying he wants enough to
have strong influence and deter activist shareholders.
IBM Stock Rallies on Surge in AI Demand. The CEO Feels 'Really
Good' About This Year.
IBM delivered mixed fourth-quarter results, as both its software
and consulting arms grew less than anticipated.
But IBM provided upbeat guidance for the year ahead and
disclosed a surge in demand for its AI software and services
businesses. Plus, IBM's closely watched full-year free cash flow
forecast came in higher than expected.
Write to singaporeeditors@dowjones.com
Expected Major Events for Thursday
00:01/UK: Dec UK monthly automotive manufacturing figures
06:00/FIN: Dec Labour force survey, incl unemployment
07:00/SWE: Dec PPI
07:00/NOR: Nov Labour force survey SA, incl unemployment
07:45/FRA: Jan Monthly business survey (goods-producing
industries)
08:00/SPN: Dec PPI
09:00/NOR: Norges Bank monetary policy decision
09:00/GER: Jan Ifo Business Climate Index
10:00/LUX: Nov Trade
11:00/TUR: Turkish interest rate decision
11:00/FRA: 4Q Claimant count and job advertisements collected by
Pole emploi
11:00/UK: Jan CBI Distributive Trades Survey
13:15/EU: ECB interest rate announcement
14:00/BEL: Jan Business Confidence Survey
15:59/UKR: Dec PPI
17:59/UK: REC JobsOutlook survey
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(END) Dow Jones Newswires
January 25, 2024 00:15 ET (05:15 GMT)
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