MARKET WRAPS
Watch For:
ECB Economic Bulletin; ECB's Lane speaks; updates from Volkswagen, Kering, Schneider Electric, Repsol, Commerzbank, Airbus, Air France-KLM, Orange, Lagardere, Nestle, Bollore, Reckitt Benckiser, Standard Chartered, NN, BAM.
Opening Call:
Stocks could open lower as investors eye Russia-Ukraine tensions and digest the Fed's minutes. U.S stock futures are pointing to opening losses. The dollar is steady in early Asia trading. The yield on the 10-year Treasury note was lower at 1.979% versus 2.044% on Wednesday. Oil slides amid optimism over U.S.-Iran nuclear talks. Gold edges higher.
Equities:
European stocks are set to open lower as investors continue to monitor Russia-Ukraine tensions and after Federal Reserve policymakers indicated they are leaning toward more decisive action on inflation but set no firm targets.
The Russia-Ukraine conflict remained on the radar. Ukrainians took to the streets in a show of unity, while the West said it saw no sign of a promised pullback of Russian troops from Ukraine's borders.
The minutes "showed a lack of clear commitments on the size of rate hikes and balance sheet reduction," said Yeap Jun Rong of IG in a report. That suggests the Fed's attitude might be "less hawkish than previously thought."
Investors are trying to figure out how stock prices will react as the Fed withdraws economic stimulus to cool inflation that is at a four-decade high.
According to the Fed's notes, officials agreed at their January meeting that faster rate hikes would be needed "if inflation does not move down" as the central bank's policymaking committee expects.
Stocks to watch:
Standard Chartered investors are likely to eye shareholder returns in the emerging market-focused bank's full-year results Thursday.
Numis Securities expects StanChart to flag opportunities to boost returns by targeting low-returning assets in its corporate division.
"If the company can free up surplus capital without materially affecting profitability, it should be able to fund additional share buybacks," Numis analyst Tom Rayner said.
"This should create value for shareholders and overcome any disappointment about softer revenue trends in Q4. Whereas a slowdown in Q4 activity is likely to mean STAN misses its full-year 2021 revenue target."
Forex:
Most Asian currencies strengthen against the dollar amid risk-on sentiment sparked by gains in many regional equity markets and abating concerns over aggressive Fed tightening.
There has been a lot of fanfare about a potential 50bp rate increase by the Fed in March and up to seven hikes this year in total, City Index said.
However, the FOMC minutes lacked such conviction, which reiterated that any tightening would be on a meeting-by-meeting basis, City Index said, adding that this spurred USD weakness.
"We've seen quite a few different moves here," Oanda's Edward Moya tells WSJ. "One of the standouts was the British pound--the pound rallied on another hot inflation report that ramped up expectations for a supersized BOE rate hike."
The senior market analyst for the Americas adds: "The British pound seems like it will appreciate further against USD as the BOE will be much more aggressive tackling inflation than the Fed.... We're starting to see rate hiking wars, you're going to see tightening being a global focal point for FX."
Bonds:
The yield on the 10-year Treasury note was lower at 1.979% versus 2.044% on Wednesday.
Treasury yields were mixed after the Fed's January meeting minutes, which economists and investors say offered little in the way of new details.
"We have reached peak uncertainty for monetary policy," said Jason England, global bonds portfolio manager at Janus Henderson Investors. "The FOMC minutes did not offer much more after the hawkish pivot already delivered at the January meeting."
"There was no discussion around a 50bps hike that many have priced into the market" for March, he wrote in an email. And "there was not a lot of information on the balance sheet although they did mention runoff will likely be quicker this time than after the last crisis...Bottom line is that for a market that has shifted more hawkish, these minutes will come off dovish."
Energy:
Oil slid amid optimism over U.S.-Iran nuclear talks. Positive developments in these negotiations are providing much-needed relief to global oil prices, as the possibility of new crude supplies reduces the supply-demand deficit, Rystad Energy said.
Although a deal isn't done yet, prices are sliding on news of progress and broad consensus in the talks, as this could ultimately lead to 900,000 barrels a day of crude added to the market by December, Rystad added.
Metals:
Gold edged higher in the morning Asian session on lingering safe-haven demand for the precious metal.
News that NATO and the U.S. said Russia was increasing its troop build-up near Ukraine as well as a dovish reading of minutes from the last FOMC meeting have bolstered safe-haven demand for the precious metal, Phillip Nova said.
Aluminum prices could gain over the long term thanks to a rising "green premium" amid countries' carbon-neutrality targets, Fitch Solutions said.
The EU passed a climate-change agenda calling for the implementation of a carbon border tax by 2023, which should mean aluminum smelted via higher-emission methods would face heavier import taxes, it added.
End users seem willing to pay the difference, with Russian producer Rusal reporting it is receiving a premium for its low-carbon aluminum products compared with regular smelting methods, Fitch noted.
"Should there be a substantial surge in demand for low-carbon aluminum, we would expect to see increasing risks to the aluminum pricing structure."
TODAY'S TOP HEADLINES
Fed Eyeing Potential for Faster Rate Increases to Ease Inflation
Federal Reserve officials at their meeting last month discussed an accelerated timetable for raising interest rates, beginning with an anticipated increase in March amid greater discomfort with high inflation.
They agreed that "if inflation does not move down as they expect, it would be appropriate for the committee to remove policy accommodation at a faster pace than they currently anticipate," said the minutes of the Jan. 25-26 meeting, which were released Wednesday.
Justice Department Targets 'Spoofing' and 'Scalping' in Short Seller Investigation
Federal prosecutors are investigating whether short sellers conspired to drive down stock prices by sharing damaging research reports ahead of time and engaging in illegal trading tactics, people familiar with the matter said.
The U.S. Justice Department has seized hardware, trading records and private communications in an effort to prove a wide-ranging conspiracy among investors who bet against corporate shares, the people said. One tactic under investigation is "spoofing," an illegal ploy that involves flooding the market with fake orders in an effort to push a stock price up or down, they said. Another is "scalping," where activist short sellers cash out their positions without disclosing it.
As Omicron Recedes, People Head Back to Work, Census Data Show
Fewer people say they are out of work for reasons having to do with Covid-19, a sign that the labor market impact of the Omicron variant of the virus could be receding.
New Census Bureau data released Wednesday show that the number of people who were out of work because they were sick or caring for someone who was sick fell to 7.8 million in late January and early February, down from almost 8.8 million in early January.
U.S. Faults China for Failing to Meet Purchase Targets Under 2020 Trade Deal
WASHINGTON-The Biden administration faulted China for failing to meet its commitments to purchase U.S. goods under the 2020 trade deal and said it was prepared to take further action to level the competitive playing field with Beijing.
China has "fallen far short of implementing its commitments to purchase U.S. goods and services in 2020 and 2021," the Office of the U.S. Trade Representative said in a report to Congress.
Japan Exports Grew for 11th Consecutive Month in January
Japan's exports increased in January for the 11th consecutive month, driven by robust overseas demand for steel and mineral fuels, Ministry of Finance data showed Thursday.
Exports rose 9.6% from a year earlier in January. That compared with December's 17.5% increase and was weaker than the 16.5% increase expected by economists surveyed by data provider FactSet.
Charlie Munger Expects Index Funds to Change the World-and Not in a Good Way
Charlie Munger doesn't think Larry Fink should be running the world.
Mr. Munger, the billionaire vice chairman of Berkshire Hathaway Inc. and Warren Buffett's business partner, said the rise of index funds like those run by Mr. Fink's BlackRock Inc. has resulted in an "enormous transfer" of the power to sway corporate decision making. That shift will "change the world," he said, and not for the better.
U.S. industrial production jumps in January on demand for heating
The numbers: Industrial production surged 1.4% in January, after a slight 0.1% decline in the prior month, the Federal Reserve reported Wednesday.
The gain was well above Wall Street expectations of a 0.5% gain, according to a survey by The Wall Street Journal.
Standard Chartered Posts Quarterly Profit
Standard Chartered PLC said Thursday that it swung to a profit in the fourth quarter, thanks to higher income from its financial-markets business and better cost efficiency.
The Asia-focused bank posted underlying pretax profit of $139 million, compared with a loss of $192 million in the same period in 2020, one of its worst quarters since the coronavirus pandemic started.
Russia Is Continuing to Build Up Forces Near Ukraine, West Says
(MORE TO FOLLOW) Dow Jones Newswires
02-17-22 0038ET
