EMEA Morning Briefing: Stocks Seen Higher as Investors Parse Econ Data, Earnings

MARKET WRAPS

Watch For:

EU Flash consumer confidence indicator; U.K. Public sector finances; trading updates from Associated British Foods, SEB

Opening Call:

European stock futures broadly advanced as technology stocks continue to bolster indexes across the Atlantic. Asian stock benchmarks were mixed; the dollar weakened and Treasury yields were mostly lower; oil futures were mixed and gold gained.

Equities:

European stock futures were broadly higher early Tuesday, as investors focus on coming economic data and corporate earnings.

U.S. stocks closed higher on Monday, with the Dow Jones Industrial Average finishing at a record high. Investors are watching for the first reading of U.S. fourth-quarter GDP as well as figures on inflation and spending this week.

Stocks may still have more room to rise for the rest of the year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.

"I think the outlook for this year was still pretty positive, particularly if earnings can grow on a year-over-year basis," Saglimbene said.

However, some others are more skeptical.

"With forward multiples already at historic peaks and earnings forecasts for 12 months forward ambitious, equity-market gains may stall in 2024, as better earnings are met with lower valuation multiples characteristic of a midcycle or soft-landing environment," Morgan Stanley Wealth Management said.

Earlier Tuesday, the Bank of Japan kept its policy rates unchanged as it waits for more solid evidence of improving wage and price trends.

Forex:

The dollar weakened slightly but several developed market and emerging market central banks meetings this week, including the European Central Bank, should bring more action to currency markets, said Brown Brothers Harriman's currency analysts.

The euro is likely to stay steady ahead of the European Central Bank's meeting on Thursday but could get something of a boost from interest rates being left unchanged amid recent talk of future rate cuts, said Bas Kooijman, CEO and asset manager of DHF Capital.

Money markets are pricing in the first ECB interest-rate cut in April, according to Refinitiv.

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The yen weakened after the Bank of Japan maintained its extraordinary easing program earlier Tuesday, which puts downward pressure on the yen.

Investors will be focusing on BOJ Gov. Kazuo Ueda's press conference later in the day for any cues on any future policy shifts.

Bonds:

Treasury yields were broadly lower as markets delayed projections for an initial interest-rate cut by the Fed.

The CME's FedWatch tool prices increasing odds that the Fed will keep rates unchanged next week and in March, with an expectation of a first cut pushed down to May.

Economists surveyed by The Wall Street Journal forecast December core annual PCE slowing only slightly, to 3% from November's 3.2%, in data due Friday.

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High-yield and investment-grade bonds offering yields of around 8% and 5% respectively appear more attractive than equities, CreditSights analysts said adding that in the long-term, U.S. corporate bonds look attractive ahead of the expected interest-rate cuts.

Energy:

Oil futures were mixed in a possible technical correction after settling at their highest price levels in around a month.

Prices could get support from geopolitical tensions, analysts said with Saxo Markets' APAC strategy team noting Ukrainian drone attacks against oil facilities on Russia's Baltic coast, and escalating tensions in the Red Sea as the U.S. and U.K. launched fresh strikes against Houthi targets.

Metals:

Gold gained early Tuesday. There is strong physical demand ahead of the Lunar New Year holidays, together with signs of speculative buying activity out of China, TD Securities said.

TD Securities' tracking of the top 10 market participants in Shanghai continues to indicate more aggressive buying than would be expected by its tracking of gold withdrawals, signaling some speculative buying, it said.

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Copper prices were lower in early Asian trading, weighed by the Chinese stock market's selloff a day earlier, Nanhua Futures analysts said.

While China's copper demand is weak amid production halts ahead of Lunar New Year, the overseas market will likely also be tepid in the short term, they said.

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Iron-ore prices gained in Asia. Demand is rising as the Lunar New Year is approaching, CRU senior analyst Liz Gao said, adding that prices may also be supported by a media report on a potential two trillion yuan stimulus to stabilize the stock market.

However, ANZ Research analysts remain cautious on the outlook with the property sector still showing signs of stress.

Beijing has ordered the most indebted local governments to delay or halt some infrastructure projects, they noted.

TODAY'S TOP HEADLINES

BOJ Keeps Rates Unchanged as It Examines Wage, Price Trends

TOKYO-The Bank of Japan kept its policy rates unchanged on Tuesday as it waits for more solid evidence of improving wage and price trends.

The Japanese central bank decided to maintain short-term interest rates at minus 0.1%. It said it would continue to set 1% as its reference point for the upper bound of the 10-year Japanese government bond yield. In October, the bank decided to make the 1% level a reference instead of a hard cap.

U.S. and U.K. Launch Major Strike on Houthi Sites in Yemen

WASHINGTON-The U.S. and U.K. launched strikes against eight Houthi targets Monday, the two countries said, in a continuing bid to stop the Yemeni rebel group's attacks on ships transiting the Red Sea.

The strikes marked the second major assault by a joint force of the two countries and the eighth time overall that the U.S. has targeted the group, which is armed, funded and supported by Iran.

BlackRock Warns Markets Not Appreciating Worsening Geopolitical Backdrop

SYDNEY-The world's largest investment manager BlackRock has warned of further deterioration in the geopolitical backdrop for financial markets in 2024, adding that asset markets aren't fully appreciating the risks.

"We expect deeper fragmentation, heightened competition and less cooperation between major nations in 2024," BlackRock said in a note to clients.

Gucci Owner Buys Fifth Avenue Property in New York City for $963 Million

The owner of Gucci and Yves Saint Laurent is acquiring property comprising multi-level luxury retail spaces in New York City's Fifth Avenue for almost $1 billion, expanding its retail locations in one of the world's most iconic avenues.

Kering said Monday that it had agreed to pay $963 million for the roughly 115,000 square foot property in a push aimed at securing what it called highly desirable locations for its fashion houses. The group recently acquired property on Avenue Montaigne and Rue de Castiglione in Paris, France.

Australia Sanctions Russian Individual for Medibank Cyberattack

Australia has sanctioned a Russian individual for his role in a cyberattack on health insurer Medibank, the first time that Australia's cyber sanctions framework has been used, officials said.

Nearly 10 million records were stolen in the 2022 attack, including names, dates of birth and sensitive medical information, and some of those records were published on the dark web, authorities said.

Arab Peace Proposal for Gaza Takes Shape as Top Biden Adviser Lands in Region

Arab countries are working on a proposal for postwar Gaza that would create a pathway toward a Palestinian state in exchange for Saudi recognition of Israel, according to Arab officials.

The proposal, submitted to Israel via the U.S., is the first joint plan by Arab states to end the war in Gaza and set a pathway toward a two-state solution. Saudi Arabia, which is one of five Arab countries making the proposal, is offering to normalize ties with Israel in return, a process derailed by the Hamas-led attack on Oct. 7.

Tiny Gaza Is Home to Most of the World's Hungriest People

After more than three months of war, Gaza City resident Samir Muhammad recently received his first bag of flour since the conflict broke out.

His son fought off hundreds of other desperate Palestinians to grab it off the back of an aid truck-one of only a small number that has succeeded in reaching northern Gaza in recent weeks.

United sees bigger-than-expected first-quarter loss after 737 Max groundings. Here's why the stock is rallying anyway.

United Airlines Holdings Inc. said it expected to lose more money than expected in the first quarter, after the government this month ordered dozens of Boeing 737 Max 9 jets grounded following a mid-air blowout on an Alaska Airlines flight.

But shares of United UAL rallied 6% after hours on Monday, after the air carrier forecast a full-year profit that was better than expected. That forecast followed a jump in fourth-quarter results that beat expectations, helped by both United's premium-cabin offerings and its cheaper basic economy fares.

Amazon Hopes to Dominate the World of Streaming Ads. It Faces Some Challenges Along the Way.

The arrival of ads on Amazon Prime Video this month is expected to upend the already crowded streaming television market in the U.S. But it also won't be an entirely smooth transition for Amazon.

The e-commerce giant is now the world's third-largest digital ad seller, behind tech companies Alphabet and Meta Platforms, with ad revenue surpassing $12 billion in the third quarter, up 26% from the period a year earlier. Its data and insights on millions of customers give Prime Video a long-term advantage by allowing marketers to target ads based on variables from shopping history to location.

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Expected Major Events for Tuesday

07:00/DEN: Jan Consumer expectations

07:00/DEN: Dec Central Government Finance & Debt

07:00/UK: Dec Public sector finances

15:00/EU: Jan FCCI Flash Consumer Confidence Indicator

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January 23, 2024 00:15 ET (05:15 GMT)

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