MARKET WRAPS
Stocks:
European stocks were weaker on Monday as investor attention turned to this week's central bank meetings, with the event that matters most being the FOMC.
"This week's central bank meetings could well determine whether the gains seen so far this month can be sustained, or whether we are in a bear market rally," CMC Markets said.
For stocks to continue its rally, "the Fed may need to break new lower ground during post-op commentary by couching policy more in line with market pricing or hinting they are entering the pause and reassessing phase," SPI said.
Stocks to Watch
While BMW offers a playbook for share-price appreciation for other car makers thanks to its consistent execution and share buyback, its strengths seem already priced in, Berenberg said, as it cut its recommendation on the stock to hold from buy.
Slowing order intake in Europe flagged by the German car maker at its third-quarter results and industry-wide cost pressures mean further appreciation in BMW's shares looks more difficult, Berenberg said.
"While backlogs provide a strong foundation for the company through at least 1H 2023, we now prefer Mercedes-Benz and Porsche in the premium and luxury segments respectively."
---
Recent moves by the ECB to raise interest rates should lead Italian banks to guide for higher profits in 2023, Citi said.
"Rising interest rates are a key positive for Italian banks' profitability," Citi said, noting that lenders are also showing stronger capital positions, more solid balance sheets and solid liquidity.
Rising rates should lead to higher net interest income--the difference between what lenders earn from loans and pay for deposits, and a key profit driver for retail banks.
UniCredit is the first large Italian bank that will report 4Q results on Tuesday.
U.S. Markets:
Stock futures were falling, as investors await a bumper week of rate announcements and earnings from tech giants.
Yields on the benchmark 10-year bond rose to 3.539%, from 3.517% Friday.
Forex:
The dollar should remain supported heading into Wednesday's Fed decision, where a rate increase of 25 basis points is widely expected, and could enjoy a rally afterward, albeit a brief one, ING said.
ING expects the Fed will likely push back against the market's pricing of 50 basis points of easing in the second half of 2023, resulting in the DXY dollar index temporarily rising to between 102.50 and 103.00.
The dollar could fall, however, if the Fed suggests any additional rate rises will be data-dependent, ING said.
The DXY, which last traded at 101.938, should stay above 101.30 heading into Wednesday's Fed meeting, ING added.
Bonds:
German 10-year Bund yields eased marginally after preliminary fourth-quarter German gross domestic product data were weaker than expected, but the reaction was muted as investors remained more concerned about inflation than recession risks.
The yield on the bond traded 4.5 basis points higher at 2.285% after the data release, according to Tradeweb, having traded 5.5bps higher at 2.295% beforehand.
---
The release of French and German consumer price indices for January on Tuesday will be the market mover on EUR duration rather than the ECB's meeting on Thursday, Morgan Stanley said.
"Bond prices tended to react asymmetrically to surprises on inflation," MS said.
It expects another positive surprise on the eurozone Harmonised Index of CPI for the third month in a row--the data is due on Wednesday--, the strategists say, expecting this to fuel another short-squeeze toward 2%.
---
The U.K.'s 2023 green gilt, which the Debt Management Office is due to auction on Wednesday has cheapened significantly, making it a good buy, RBC said.
The 0.875% 2033 green gilts "have been identified as a cheap bond," it added.
"We feel comfortable going long the bond given current valuations."
There are signs of a return of the 'greenium'--a higher premium investors pay to buy green bonds--after this was "priced out consistently in 2022," making the 2033 green gilt look "too cheap," RBC said.
---
Read Greek Bond Yields Fall After Fitch Ratings' Upgrade
Read Finnish Government Bond Curve Looks Attractive at 15-Year Segment
Energy:
Oil prices were down around 1% as investors await a busy week of meetings by global central banks and OPEC+.
OPEC and their Russia-led allies are unlikely to adjust their output levels when they meet on Wednesday, and are expected to await more information about China's reopening and Russian production, ING said.
"We do not expect any change in output policy from the group, given the lingering uncertainty that overshadows the market, both from a supply and demand perspective," ING said.
Metals:
Base metals were mixed, with gold prices lower, as investors weighed the effect of China's reopening versus central bank interest rates rising to a 15-year high.
DOW JONES NEWSPLUS
EMEA HEADLINES
Eurozone Economic Sentiment Improved in January for Third Straight Month
Economic sentiment in the eurozone improved more than expected in January, posting its third increase in as many months amid easing recession fears.
The eurozone's economic sentiment indicator-an aggregate measure of business and consumer confidence-rose to 99.9 in January from an upwardly revised 97.1 in December, data from the European Commission showed Monday. This marks the highest level since June.
Germany Economy Fell in 4Q on Energy-Price Shock
The German economy contracted slightly in 2022's fourth quarter, defying expectations of a deep recession only a few month ago, as mild winter weather and government stimulus cushioned the hit from a surge in energy prices.
Germany's gross domestic product fell 0.2% from October to December compared with the previous quarter, according to preliminary data from the country's statistics office released Monday, swinging from an upwardly revised 0.5% expansion recorded in the third quarter.
Russia's invasion of Ukraine will reduce oil and gas consumption while speeding up transition to cleaner fuels, BP says
The Russian invasion of Ukraine will reduce demand for oil and natural gas and speed up the transition to cleaner products, according to oil giant BP.
BP, in its annual energy outlook, said it's now forecasting 2.3% less consumption for energy in 2035 than it did a year ago, as declines for natural gas, oil and coal will be partly offset by increases fornuclear and renewable energies.
Royal Philips to Cut Extra 6,000 Jobs by 2025 as It Seeks to Improve Performance - Update
Royal Philips NV on Monday said it will cut an extra 6,000 jobs by 2025, including around 3,000 this year, as part of a plan to improve performance and drive value creation.
The Dutch health-technology company-which said in October that it was cutting 4,000 jobs, or about 5% of its 80,000-strong workforce-said Monday that the simplified operating model will make it more agile and competitive, while reducing costs. The job cuts announced Monday are in addition to those outlined in October.
Nissan, Renault Agree on Alliance Shake-Up
Nissan Motor Co. and its French partner, Renault SA, said Monday they have agreed to reorganize their alliance, more than two decades old, in a deal that includes reducing Renault's stake in Nissan.
The Japanese auto maker achieved its long-sought goal of limiting its partner's control over its management, while the French company got an investment in its electric-vehicle business, as it had wanted. The amount of the investment wasn't disclosed.
Shell to Reduce Size of Executive Committee to Improve Performance
Shell PLC said Monday that it will reduce its executive committee from nine to seven members to further simplify the organization and improve performance.
The London-based energy giant said that the integrated gas and upstream businesses will be combined to form an integrated gas and upstream directorate led by current Upstream Director Zoe Yujnovich. The downstream business will be combined with renewables and energy solutions to form a downstream and renewables directorate led by current Downstream Director Huibert Vigeveno.
Unilever Taps Dairy Boss as New CEO
Unilever PLC has appointed Hein Schumacher as its new chief executive, tapping the head of a European dairy cooperative to lead its effort to reinvigorate growth and navigate economic uncertainty.
The owner of Ben & Jerry's ice cream and Dove soap said Monday that Mr. Schumacher would become CEO on July 1. He succeeds incumbent Alan Jope, who the company said in September would retire this year.
Ryanair Holdings Swings to 3Q Profit, Backs FY 2023 Guidance
Ryanair Holdings PLC on Monday reported a swing to third quarter adjusted post tax profit, which was slightly ahead of guidance provided at the start of the month, and backed its full year forecast.
The Irish budget airline added that it still expects to report a fourth quarter loss due to the absence of Easter from March.
Eni Launches $8 Bln Gas Project in Libya
Eni SpA has launched a new natural-gas project in Libya to supply the domestic market and ensure exports to Europe, with an overall estimated investment of $8 billion and production slated to start in 2026.
The Italian energy company said Saturday that production from the project called "Structures A&E," which consists of two gas fields, is expected to reach a plateau of 750 million standard gas cubic feet a day.
U.K. Prime Minister Fires Top Official Over Tax Probe
LONDON-British Prime Minister Rishi Sunak on Sunday fired Nadhim Zahawi as chairman of the U.K.'s ruling Conservative Party, after an internal probe concluded Mr. Zahawi failed to disclose an investigation into his tax affairs last year, the latest in a series of controversies to wash over the government.
Mr. Sunak dismissed the former businessman after the government's ethics adviser concluded on Sunday that not disclosing the tax probe was a serious failure.
(MORE TO FOLLOW) Dow Jones Newswires
01-30-23 0621ET
