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CPI data for France, Germany, North Rhine Westphalia, Bavaria, Brandenburg, Baden-Wuerttemberg, Hesse, Saxony; Germany unemployment; U.K. Nationwide House Price Index; trading updates from Royal KPN, Banco Santander, Novartis, GSK, SSAB, H&M, SKF, Imperial Brands, Entain

Opening Call:

Shares may head slightly lower on Wednesday ahead of the Federal Reserve rate decision and a raft of corporate earnings. In Asia, stock benchmarks were broadly lower; Treasury yields were little changed; the dollar strengthened; oil futures fell and gold gained.


European stock futures are broadly tracking a tad lower ahead of the Fed's looming interest-rate decision and corporate earnings.

The Fed is expected to hold interest rates steady but traders will be looking to Fed Chair Jerome Powell's remarks for guidance on future rate cuts.

Meanwhile, investors are parsing earnings for signs of how consumers are holding up and companies' expectations for future quarters.

Big-tech stocks have propelled indexes so far this year. Investors are waiting to see whether earnings and guidance for future quarters are enough to drive them even higher.

"I'm still trying to parse through what's going on with earnings, but it's been kind of a mixed trend," said Matt Dmytryszyn, chief investment officer at Telemus Capital.

"We're seeing some mixed messages."


The dollar gained ahead of the Federal Open Market Committee decision due later today.

Market participants perceive the stronger-than-expected U.S. labor market data as an indication that the Fed is now less likely to cut rates early this year, the Bank of Singapore said.

While the dollar may weaken over 2024, this could be a winding road as optimism over Fed easing is pared and as non-U.S. economic growth is still a worry, it said.


The Bank of England is widely expected to leave interest rates on hold on Thursday and to signal that interest-rate cuts remain some way off due to high inflation, but economic concerns could still weigh on the pound, said Tickmill Group analyst James Harte.

"Recession risks in the U.K. have been a key focus point recently and any sign that the BOE expects a slowdown this year will no doubt weigh on sterling near-term," he said.


Treasury yields were little changed in Asia as traders assessed improving consumer-confidence figures and looked ahead to Wednesday's interest-rate policy announcement by the Fed.

"We continue to expect the first rate cut in March, though we expect no strong signal in January," BofA said.

"The Fed needs to buy time to see more data. We think the policy-rate guidance needs to change again, as we believe the current upside-hiking bias in the statement remains untenable. The language is likely to become more neutral, but the direction of travel of recent changes would signal some easing bias."


Oil futures declined amid cautious sentiment.

Market participants seem to be waiting for U.S. President Biden's response to a drone attack on an American military outpost in Jordan, although Biden seems inclined to not escalate the Middle East conflict and sanctions could be the likely outcome, Saxo Market's APAC strategy team said.

"The spreading conflict in the Middle East remains the most visible and growing risk for energy markets," analysts at J.P. Morgan said.

"While escalation cannot be written off, it remains unlikely in our view, as main parties in the conflict have strong incentives to avoid direct confrontation, and so far they have acted accordingly," they added.


Gold edged higher and was likely to be supported by buying interest.

Discretionary traders' positioning in the precious metal appears to be behind the curve ahead of a possible Fed rate-cut cycle, TD Securities said.

Whether the Fed cuts rates in March or not, macro traders in gold appear to be historically under-invested and the recent hot U.S. economic data releases may have caught this group in a bear trap, it added.


Copper prices were flat in Asia even as its outlook has turned bullish, ANZ Research analysts said.

The production cut from Anglo American and the closure of Panama's Cobre mine have changed the supply outlook and led speculators to raise their bullish bets to the highest in three weeks, they said.

Meanwhile, tightening of supply is raising concerns in the Chinese market as smelters threaten to cut output amid plunging profits, they added.


Iron-ore prices were likely to retreat toward $100/metric ton in the months ahead, from roughly $135/ton now, according to Commonwealth Bank of Australia analyst Vivek Dhar.

His forecast is based on expectations of limited stimulus in China and, consequently, losses for steelmakers there.

"The clear risk to our view is that stimulus proves stronger than we expect as China needs to rely on infrastructure investment to ensure an expected economic growth target of around 5% this year again," Dhar said.


China Factory Activity Contracts for Fourth Straight Month

HONG KONG-Chinese factory activity remained in contraction for a fourth straight month, the latest sign that the country's economy is struggling to regain momentum, adding to pressure on policymakers to boost demand.

The muted activity in China's sprawling manufacturing sector suggests a soft start to the year, and highlights the limits of Chinese leaders' attempt to double down on manufacturing to drive the economy as other traditional growth engines, particularly real estate, remain in the doldrums.

Negative Takes on China's Economy Are Disappearing From the Internet

BEIJING-Several prominent commentaries by economists and journalists in China have vanished from the internet in recent weeks, raising concerns that Beijing is stepping up its censorship efforts as it tries to put a positive spin on a struggling economy.

This month, top lieutenants of Chinese leader Xi Jinping urged officials to "promote the bright prospects of China's economy." Those calls came after an unusual warning from China's top spy agency in December, which cautioned the public to be wary of those who denigrate the economy. "Economic security is a key component of national security," the Ministry of State Security said.

Europe Regulates Its Way to Last Place

These are humbling times for Europe. The continent barely escaped recession late last year as the U.S. boomed. It is losing out to the U.S. on artificial intelligence, and to China on electric vehicles.

There is one field where the European Union still leads the world: regulation. Having set the standard on regulating mergers, carbon emissions, data privacy, and e-commerce competition, the EU now seeks to do the same on AI. In December it unveiled a sweeping draft law that bans certain types of AI, tightly regulates others, and imposes huge fines for violators. Its executive arm, the European Commission, might investigate Microsoft's tie-up with OpenAI as potentially anticompetitive.

Universal Music Group Poised to Stop Licensing Music to TikTok

Universal Music Group, the world's largest music company, said it would stop licensing content to TikTok if the firm fails to reach a new contract with the social-media app to pay its musicians, which include Taylor Swift and Drake.

The current contract is set to expire Wednesday, and no new agreement has been reached, Universal said in an open letter to the artist and songwriter community.

GSK Reports Earnings Wednesday. Investors Are Watching the RSV Vaccine Showdown.

GSK is scheduled to report financial results Wednesday in the midst of a busy week for big pharma earnings.

Like many of its peers, the U.K.-based company is looking to recover after a lackluster 2023. GSK's American depositary receipt climbed 5.6% in 2023, while the S&P 500 rose 24%.

Netanyahu Puts Political Survival Ahead of Tough Decisions on Gaza

Israeli Prime Minister Benjamin Netanyahu is facing one of the toughest political decisions of his long career: who should govern Gaza after Hamas?

So far he's dodging it.

Prospect of Trump 2.0 Has Europe Scrambling on Military Spending

BRUSSELS-The prospect of Donald Trump returning as president is prompting some of America's staunchest allies in Europe to push their neighbors that are more reluctant to spend into further action on defense and security.

Results are slowly emerging, but the question dogging Europe is whether the continent can convince Trump it isn't free-riding, as he has said it is. Campaigning in Las Vegas on Saturday, Trump criticized Europeans for insufficient military spending.

Samsung Posts Weakest Earnings in Over a Decade Despite Chip Recovery

Samsung Electronics posted its weakest annual earnings in more than a decade after net profit fell 73% in the final quarter of 2023, though the technology giant's flagship semiconductor business narrowed losses on a recovery in demand driven by the artificial-intelligence boom.

The South Korean maker of memory chips, smartphones and televisions said Wednesday that net profit was 6.345 trillion won (about $4.77 billion) for the fourth quarter, compared with 23.842 trillion won a year earlier and 5.844 trillion won in the previous quarter.

Elon Musk's $55.8 Billion Tesla Pay Package Struck Down by Judge

A Delaware judge struck down Elon Musk's multibillion-dollar pay package at Tesla after finding the process for securing its approval "deeply flawed," a major setback for the chief executive of the world's most valuable automaker.

The decision, issued Tuesday in the Delaware Court of Chancery, calls into question how Tesla's board plans to compensate Musk, a serial entrepreneur with an array of other business interests.

Google's Ad Sales Fall Short of Wall Street's Lofty Expectations

Google's advertising sales fell short of Wall Street's expectations, sending shares tumbling despite strong growth in other areas of the search giant's business.

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01-31-24 0015ET