EMEA Morning Briefing: Stocks Poised to Rise After U.S. Tech-Driven Rally

MARKET WRAPS

Watch For:

No major economic data and corporate trading updates expected

Opening Call:

Shares look set to open in positive territory in Europe on Monday after a rally in U.S. technology stocks propelled the S&P 500 to an all-time high. In Asia, stock benchmarks were mixed; Treasury yields consolidated; the dollar and oil were both mixed; while gold fell.

Equities:

European stocks could gain ground on Monday, taking their cue from Friday's U.S. tech rally which sent the S&P 500 to an all-time high.

Optimism on artificial intelligence drove U.S. technology shares higher despite rising uncertainty about whether the Federal Reserve will cut interest rates as quickly as market participants expect.

Investors in both stock and bond markets are now speculating the U.S. central bank will be in no rush to cut borrowing costs as the economy shows signs of resilience.

Forex:

The dollar was mixed in Asia, but may weaken on fading Fed rate-cut prospects.

A growing number of FOMC members disagree with market pricing for the beginning of a rate cut cycle in March, CBA said.

The dollar could strengthen further if market participants continue to push back the timing of the first Fed rate cut, CBA added.

Bonds:

Treasury yields consolidated after previous gains in the wake of data showing that U.S. consumer sentiment soared this month.

Strong consumer sentiment indicates the Fed might need more time to assess the path of inflation.

"The disconnect between the Fed's messaging on a March cut and the market's eagerness to price one in has defined the first half of January, " said BMO Capital Markets.

"Given the prevailing policy landscape, the choppy price action that has become the new norm in U.S. rates is unlikely to shift in the coming week," it said.

Energy:

Oil was mixed amid demand concerns.

Oil prices have failed to take off amid expectations of overly depressed demand, given the backdrop of the weak global economy, TD Securities said.

However, ongoing geopolitical risks associated with Red Sea attacks and Western strikes on the Houthis have kept oil prices well-supported, it added.

Metals:

Gold edged lower amid waning Fed rate-cut bets.

Stronger-than-expected U.S. economic data released recently, such as retail sales, have resulted in a notable reduction in Fed rate-cut expectations, Commerzbank Research said.

As long as the downward adjustment of rate-cut expectations continues, gold and silver will likely stay on the backfoot, it added.

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Copper gained amid tight supply despite macroeconomic headwinds.

Copper prices have been weighed recently by the PBOC's surprising decision to keep key interest rates unchanged and diminishing prospects of the U.S. Fed cutting interest rates soon, ANZ Research said.

However, copper has found some support from supply-side issues, including the forced closure of the Panama Cobre mine and Anglo American's decision to drastically cut output from its copper operations, it added.

TODAY'S TOP HEADLINES

Ocean Shipping Rates Surge as Red Sea Attacks Continue

Global shipping prices are continuing to rise as Houthi rebels keep up attacks on cargo vessels in and around the Red Sea.

The disruptions are at a key point for ships passing through the Suez Canal and are creating ripples across supply chains in Europe and the U.S., delaying shipments and raising transportation costs.

Labor Supply Helped Tame Inflation. It Might Not Have Much More to Give.

Many workers came off the sidelines to join the labor force in 2022 and 2023, aiding the Federal Reserve's fight to tame inflation by easing labor shortages and putting downward pressure on wage growth.

Big additional gains may be hard to achieve.

China Benchmark Lending Rates Held Steady

China's benchmark lending rates were kept steady after the central bank held its key policy rates unchanged earlier this month, according to data released by the People's Bank of China.

The one-year loan prime rate stayed at 3.45% while the five-year rate was left at 4.2%, said the PBOC.

FDJ Nears Roughly $2.5 Billion Deal for Kindred Group

La Française des Jeux is in talks to acquire Kindred Group for around $2.5 billion, according to people familiar with the matter, in a deal that would create one of Europe's biggest online gambling companies.

A deal could be announced as soon as Monday, assuming talks don't break down, the people said. It would follow calls for the possible sale of the Stockholm-listed company by Corvex Management, a New York activist investor headed by Keith Meister.

EU Tackles New $22 Billion Plan to Boost Ukraine Military Aid

BERLIN-European Union officials will this week start tackling a new plan to unlock tens of billions of dollars in military assistance for Ukraine, seeking to revamp a critical aid program bogged down by internal divisions.

The EU move comes after a number of European countries have increased their bilateral military assistance to Ukraine even as the Biden administration is hamstrung by Congress on providing large-scale assistance.

Ukraine Strikes Russian Fuel Terminal on Baltic Sea in Long-Range Attack

LVIV, Ukraine-Ukraine hit a Russian fuel terminal on the Baltic Sea, one of its longest-range strikes yet in a growing effort to damage Russia's war economy.

The Security Service of Ukraine hit the Ust-Luga Complex near St. Petersburg on Sunday with drones, triggering a large-scale fire, Ukrainian officials said. The attack will cause economic losses and damage logistics for fuel supplies to the Russian military, the officials said.

U.S., Israel Voice Conflicting Views on Future Palestinian State, Exposing Friction

Disagreements between President Biden and Israeli Prime Minister Benjamin Netanyahu over the possibility of establishing a Palestinian state after Israel's war with Hamas have spilled into public view in recent days, threatening to create a deeper rift between Israel and its biggest ally.

In a statement released Sunday, Netanyahu said that Israel must continue to maintain security control over areas west of the Jordan River, which includes Israel, the occupied West Bank and now the Gaza Strip.

Boeing Snafus Add New Risks to 2024 Production Goals

Boeing was having trouble making enough 737s before the Alaska Airlines door-plug blowout. Now it faces new concerns that added inspections and regulatory scrutiny will sap its output this year.

Key airline customers are inspecting existing 737 MAX 9 planes, while federal air-safety officials are delving into the jet maker's broader manufacturing processes. They are also examining supplier Spirit AeroSystems, which produced the plane's door plug and fuselage.

Microsoft Reports Hack by Nation-State Actor

Microsoft disclosed Friday that it was targeted by a Russian state-sponsored hacking group that stole information from its senior leadership team and other employees.

The tech giant detected last week that the threat actor, which it has identified as the group Midnight Blizzard, had extracted information from a small percentage of employee email accounts. Based on a preliminary analysis, those accounts included members of its senior leadership team and employees in its cybersecurity and legal teams.

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Expected Major Events for Monday

05:30/NED: Jan Consumer confidence survey

09:00/POL: Dec Agricultural prices

09:00/POL: Dec Average gross wages

09:00/POL: Dec Industrial Production Index

09:00/POL: Dec Retail Sales

10:00/LUX: Dec Unemployment

10:00/BEL: Jan Consumer Confidence Survey

10:00/MLT: Dec RPI

11:00/UK: Dec Aluminium Production report

17:59/POR: Oct ICSG Copper Report

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

(END) Dow Jones Newswires

January 22, 2024 00:16 ET (05:16 GMT)

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