MARKET WRAPS
Stocks:
European stocks rose on Thursday, although gains were limited,
as investors looked towards U.S. inflation data which should give
clues on the prospects for Federal Reserve interest-rate cuts.
Economists surveyed by The Wall Street Journal estimate consumer
prices overall rose 0.2% in December from the prior month and
increased 3.2% from a year earlier.
Many investors believe the retreat in inflation will allow the
Fed to begin cutting interest rates as soon as March.
Shares on the Move
Marks & Spencer's said it expects its full fiscal-year
results to meet market forecasts after a strong performance over
Christmas. However, its shares dropped around 7% on some inevitable
profit taking, after a blistering share price performance, but also
on its cautious outlook, analysts noted.
Stocks to Watch
Daimler Truck's fourth-quarter margin looks strong , but 2024
could bring lower earnings, JP Morgan said. The company could post
a fourth-quarter industrial margin of 10%--which JPM sees as a
clear statement that it can hang with the best--on EUR15 billion in
group sales, putting revenue for the year at the lower end of the
full-year guidance range.
Economic Insight
Consumer concerns regarding the rising cost of living have eased
over the last year, but people remain cautious about spending,
Capgemini Research Institute said.
The report showed that 43% of respondents believe their personal
finances will get worse in the coming months. In addition, 73% of
consumers said they will be more loyal to companies that help them
relieve financial pressure.
U.S. Markets:
Stock futures rose ahead of the CPI data, while the yield on the
benchmark 10-year note was back below 4%.
Stocks to Watch
Citigroup said it was taking one-time charges of $1.3 billion
related to exposures to geopolitical and economic risks in
Argentina and Russia. The stock was falling 0.6% premarket.
Coinbase rose 4.6%, MicroStrategy gained 2.6%, and Marathon
Digital was up 5.1% after the SEC approved the launch of the first
spot Bitcoin exchange-traded funds .
Forex:
The dollar is pricing in the biggest interest-rate cuts of all
G10 currencies, leaving very little safe-haven premium priced in
and suggesting the U.S. currency has room to strengthen, Deutsche
Bank Research said.
Even as the Fed cuts interest rates, the dollar is still likely
to remain a higher-yielder among major currencies, suggesting the
dollar should rise near term, it said.
"We see the risks skewed towards a stronger dollar for the first
few months of 2024 with EUR/USD revisiting 1.05."
Danske Bank Research said the U.S. inflation data will likely be
key to determining the near-term outlook for the dollar and U.S.
rates, though it won't be a "game-changer," as it thinks the
figures broadly will align with consensus.
The relatively loose financial conditions around the end of
2023, which helped push EUR/USD above 1.10, could very well tighten
within the next couple of months, Danske Bank said, adding that it
considers the euro remains a sell against the dollar from a
strategic perspective.
Bonds:
Eurozone core government bond markets are expected to
consolidate in the near term, HSBC Global Research said.
"We expect a period of volatile consolidation, with the chance
of higher yields in the short term given the aggressive
[interest-rate] cutting expectations in market prices."
HSBC Global Research turned neutral from mildly bullish this
month on eurozone core bonds due to the lower yield levels which
are close to its 2.00% end-2024 forecast for the 10-year Bund
yield.
HSBC Global Research also said German 10-year Bund yields start
to look cheap at levels around 2.40%, while a fall below 2% would
take Bunds into rich territory.
"Our longer-term conviction for a decline in yields remains
unchanged, but the question of how far and how fast that decline
happens depends on several factors," it said.
The decline in inflation is the most significant "but a fall
below 3% in core inflation is a necessary but not sufficient
precondition for European Central Bank rate cuts."
Energy:
Oil prices inched higher on market concerns about heightened
tensions in the Middle East.
Yemen's Houthi rebels carried out one of the largest missile and
drone attacks on merchant vessels transiting the Red Sea earlier
this week, raising fears of further escalation in the region and
supply disruptions amid the Israel-Hamas war.
Metals:
Base metals and gold prices traded higher ahead of U.S.
inflation data.
Nickel is stuck in a supply glut that will take some time to
clear , BMI said, as it downgraded its forecast for 2024 to
$20,000/metric ton from $20,600/ton before.
Weak demand in China and a subdued growth outlook across major
markets will cap prices, BMI added.
Lithium investors are likely to experience further pain before
any recovery in prices , according to Morgan Stanley.
The China lithium carbonate price has fallen to roughly
$12,000/metric ton, down 80% in 2023 and its lowest value since
mid-2021. The battery metal's dramatic retreat has sparked debate
on whether prices may be near a nadir.
EMEA HEADLINES
Tesco Lifts Guidance After Strong Christmas Period
Tesco raised its profit guidance for the second time this fiscal
year after it saw stronger-than-expected volume growth in the U.K.
market during Christmas.
The U.K. grocer on Thursday said it expects retail adjusted
operating profit-the company's preferred metric, which strips out
exceptional and other one-off items-for fiscal 2024 of around 2.75
billion pounds ($3.50 billion). This compares with a previous
guidance range of GBP2.6 billion to GBP2.7 billion, and GBP2.49
billion in fiscal 2023.
Taylor Wimpey 2023 Profit Seen at High End of Guidance Though
Orders Slipped
Taylor Wimpey said its performance met its expectations, seeing
operating profit at the high end of its previous guidance range,
though its order book fell.
The house builder said Thursday it expects 2023 operating profit
including joint ventures and excluding exceptional items to meet
the high end of its prior guidance range of GBP440 million to 470
million pounds ($560.7 million- $598.9 million). For 2022, it
posted an operating profit of GBP923.4 million.
Thomson Reuters Launches $626 Million Offer for Pagero
Thomson Reuters is launching a $626 million cash bid for Pagero
Group, beating a rival offer made by Vertex for the Swedish
e-invoicing provider last month.
Thomson Reuters said Thursday that it will begin a public tender
offer to acquire all of Pagero's shares on Friday. It intends to
pay 40 Swedish krona a share, valuing the Gothenburg-based company
at SEK6.4 billion ($626.0 million).
GLOBAL NEWS
Fed's Williams says interest rates need to stay high 'for some
time' to ensure inflation is tamed
New York Federal Reserve President John Williams said U.S.
interest rates will likely need to stay high "for some time" until
senior central bank officials are confident the rate of inflation
is returning to 2%.
Williams made his remarks Tuesday at a speech in White Plains,
N.Y. He is seen as a close ally of Fed Chairman Jerome Powell, so
his words carry a lot of weight in financial markets.
U.S., U.K. Warships Shoot Down Houthi Barrage in Red Sea
MANAMA, Bahrain-U.S. and British warships shot down one of the
largest barrages of missiles and drones fired by Yemen's Houthi
rebels into the crucial Red Sea shipping lane, while Secretary of
State Antony Blinken continued his efforts to prevent the conflict
in Gaza from escalating into a regional war.
The U.S. is considering conducting strikes against land-based
Houthi targets in Yemen in response to the attacks in the Red Sea,
officials said. The overnight barrage would likely elicit a U.S.
response, a defense official said Wednesday.
South Africa Accuses Israel of Genocide in U.N. Court
The International Court of Justice begins hearings Thursday on
South Africa's accusation of genocide against Israel, contending
that the Jewish state's military response to Hamas attacks launched
from Gaza violates the international treaty drafted in the
aftermath of Nazi Germany's systematic extermination of six million
Jews.
More than 150 countries have ratified the Genocide Convention,
which allows a nation to file a complaint against another it
believes is committing genocide even if, as in South Africa's case,
it has no direct connection to the conflict. South Africa argues
that Israeli military operations, which the Gaza health ministry
says have cost more than 23,000 Palestinian lives, are intended to
wipe out Palestinians in Gaza as a distinct group.
Write to ina.kreutz@wsj.com
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(END) Dow Jones Newswires
January 11, 2024 05:45 ET (10:45 GMT)
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