MARKET WRAPS
Stocks:
European stocks slipped ahead of the European Central Bank's
interest-rate decision.
The ECB will probably keep interest rates unchanged and like the
Federal Reserve, the big question is when it will consider
cuts.
The eurozone's growth outlook isn't great, but also not bleak
enough to force near-term monetary easing, Mizuho said.
"Financial conditions have also eased notably in the last few
months and we think the ECB will not risk easing them further by
engaging in any way of early rate cut talk," it said.
Stocks to Watch
Tesla's warning about notably slower growth will trickle down to
Europe's automotive and electric-car suppliers, but some companies
look better-positioned than others, Citi said.
Forvia's direct exposure to Tesla is a key growth driver for the
company, and it's still a positive relationship overall, but the
news implies a 1.2% decline in top-line growth, Citi said.
Valeo isn't directly exposed to Tesla, but expectations of an
organic growth rebound could be clouded by persistently slowing EV
volume growth, Citi added.
On the other hand, Continental is significantly less exposed
while Michelin is relatively less vulnerable to any slowdown, it
said.
U.S. Markets:
Stock futures suggested a modestly higher start ahead of a
report on economic growth in the fourth quarter.
Economists expect gross domestic product rose by 1.5% in the
last three months of 2023.
Stocks to Watch
Boeing was falling 2.1% after regulators put limits on its
production of 737 MAX jets, but cleared the way for grounded planes
to resume flying.
Tesla fell more than 7% in offhours trading after the company
said growth would slow in 2024.
Forex:
The euro showed little reaction to weaker-than-expected German
Ifo business sentiment index , and remained slightly higher on the
day.
It edged higher against the dollar, however, any rise will be
limited ahead of the ECB decision and press conference later.
If ECB's Lagarde reiterates her recent message that
interest-rate cuts aren't a topic for the near term then EUR/USD
gains are likely to stay capped below 1.10, UniCredit Research
said.
The Norwegian krone rose after Norway's central bank left
interest rates on hold at 4.5% as expected and said the rate would
likely be kept at that level for some time ahead.
EUR/NOK fell to a one-week low of 11.3502 after the
announcement.
Bonds:
Eurozone government bond yields traded a nod higher ahead of the
ECB's meeting where market participants are looking for guidance on
the timing of expected interest-rate cuts, Commerzbank Research
said.
"Combined with solid U.S. growth figures, we expect further
pressure on the front-end."
Strong demand for new government bonds in the eurozone so far
this year is based on valuations and spread markets, DZ Bank
Research said.
"Investors are still looking at comparatively high yields in a
stable spread environment," it said.
This is enough reason for investors to make strong purchases
during the syndication season with new issue premiums almost at
previous year's level."
Additionally, DZ Bank Research said government bond issuance so
far this year has been quite positive for the national
treasuries.
"The high volume [of issuance] has already catapulted the
funding progress of many [eurozone] states significantly
forward."
The volume-weighted new issuance premiums in January 2024 are
slightly lower than in the same period of 2023, at 3.6 basis points
versus 5.3bps in January 2023, DZ Bank said.
Demand measures are significantly higher than in previous years,
and issuance shows that the crowding-in process of private
investors has been successful so far, it added.
Energy:
Oil prices traded higher after U.S. data showed a significant
drop in crude stockpiles last week and China cut reserve
requirements for banks in order to spur growth, bolstering
sentiment around the country's economic recovery.
Meanwhile, Middle East tensions keep supporting prices, but
analysts don't expect to see strong gains unless oil supply gets
materially disrupted.
Metals:
Base metals and gold were little changed as investors weighed
broad market concerns over supply disruptions and China's move to
boost liquidity in the banking sector in an effort to prop up
economic growth.
"While these announcements might offer some short-term
incentives for base metals, we maintain the view that with a lack
of sustainable improvements across the nation's [China's]
performance, prices will come back to their averages in due
course," Sucden Financial said.
EMEA HEADLINES
Nokia Starts to See Green Shoots Despite Continuing
Challenges
Nokia expects the challenging network industry environment to
continue through the first half of 2024 as operator spending
remains muted, but the situation should improve later in the year,
it said.
The Finnish telecommunications company said Thursday that it is
now starting to see some "green shoots on the horizon," with
improving order intake in its network infrastructure business.
STMicroelectronics Revenue, Gross Margin Slightly Miss 4Q
Target
STMicroelectronics' said that fourth-quarter revenue and gross
margin came in slightly below its expectations, with gains in
personal electronics offset by slower growth in the automotive
business.
The European chip maker said Thursday that net revenue fell 3.2%
to $4.28 billion compared to the same quarter a year ago, slightly
below its target of $4.30 billion. Analysts had also expected $4.30
billion in sales, according to Factset.
Publicis Organic Growth Picks Up, Beating Expectations
Publicis Groupe said organic revenue growth picked up in the
fourth quarter from the third, beating analysts' expectations.
The French advertising group's organic revenue growth
accelerated to 5.7% in the fourth quarter following a 5.3% rise in
the previous quarter, according to preliminary figures released
Thursday. This beat analysts' expectations of a 4.2% increase,
according to consensus estimates provided by Visible Alpha.
GLOBAL NEWS
Chinese Investors Are Pouring Into the U.S., Japan
Chinese individual investors are desperate to shift their money
out of the country-and they are willing to pay a big premium to do
so.
The best example of their desperation: Some this week have been
buying funds that offer exposure to Japanese stocks at a 20%
premium to what those stocks are worth.
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.
China's RRR Cut Doesn't Solve Long-Term Economic Concerns
The timing and scale of the People's Bank of China's policy
easing this week may have surprised investors and given stock
markets a much-needed lift, but the move does little to resolve
long-term economic concerns.
The fact that the China central bank governor announced the cut
in banks' reserve requirement ratio at a press conference for the
first time indicates that authorities "are very serious about
easing monetary policy," said Raymond Yeung, chief economist of
Greater China at ANZ Research.
Trump Rivals Were Hoping for a Courtroom Knockout. Time Is
Running Out.
WASHINGTON-Donald Trump's political opponents had hoped his
legal difficulties would torpedo his third run for the presidency.
But a knockout blow before the election is looking increasingly
unlikely.
The former president, who looks poised to sew up the Republican
presidential nomination after his win Tuesday in New Hampshire, is
proving less vulnerable on the legal front than many of his critics
predicted.
Nikki Haley Pushes Forward With Longshot Effort to Dethrone
Trump in GOP Race
CONCORD, N.H.-Nikki Haley isn't standing down in her longshot
bid to halt Donald Trump's fast-building momentum toward the
Republican nomination.
Write to ina.kreutz@wsj.com
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(END) Dow Jones Newswires
January 25, 2024 06:03 ET (11:03 GMT)
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