MARKET WRAPS
Stocks:
European stocks traded in the green on Monday, as investors awaited a crucial U.S. inflation report due tomorrow which will guide the Federal Reserve's path on interest rates.
Forecasters expect the inflation figures to have ticked up slightly on a monthly basis but show a further on-year decline.
"If U.S. inflation hasn't eased, or eased enough, or God forbid, ticked unexpectedly higher on [a] yearly basis, we could rapidly see the post-NFP optimism, and the pricing on the goldilocks scenario to leave its place to fear and chaos," Swissquote Bank said.
Stocks to Watch
Many of Adidas's problems are specific to the company and will prove tough to overcome, Hauck & Aufhaeuser said.
Adidas last week set out 2023 guidance that envisions a major operating loss from the write-off of Yeezy stock following a split with the label's designer, Kanye West. This is the core issue, but Adidas also suffers from other problems, including a lack of innovation, market-share losses and a fading of its China performance, H&A said.
With consumer slowdown looming in Europe, "it remains questionable whether new CEO [Bjorn] Gulden will be able to restore Adidas's glory."
H&A cut its target price on the stock to EUR70 from EUR78, keeping a sell rating.
Read Adidas Now Has a Clean Slate
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Siltronic faces near-term risks to earnings as customer inventories pile higher after a period of weak demand for electronics, Berenberg said.
Partly driven by sluggish shipments and supply-chain complications, inventory levels in Siltronic's value chain exceed the highest levels seen before the latest wafer-market downturn in 2018-19, Berenberg estimates.
The German wafer producer's 2022 price increases helped it achieve sales growth and an Ebitda margin of 37%--but given the buildup of inventory and fading foreign exchange tailwinds, the brokerage sees downside risks to consensus expectations.
It cut Siltronic to hold from buy and reduced its target price to EUR91 from EUR95.
European Central Bank
The ECB is likely to start cutting interest rates in early 2024 after seeing how sharply inflation falls in 2H 2023 and as inflation expectations decline too, Pantheon Macroeconomics said.
"By the end of the year, we think inflation will have dropped to 2.5%, and, if we are right that inflation expectations will fall in tandem, this will allow the bank to start prepping markets for interest rate cuts."
Pantheon expects four 25-basis-points interest-rate cuts in 1H 2024, with the first two coming in 1Q. Money markets are pricing in an interest-rate cut by the ECB in February 2024, according to Refinitiv data.
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The bar is pretty high for markets to reprice the ECB's terminal rate--where it stops raising interest rates--higher than current levels, Morgan Stanley said.
Money markets are pricing the ECB's terminal deposit rate at 3.50% in July, according to Refinitiv data.
A renewed decline in long-term rates over the coming weeks can be expected given "a stabilisation at the short-end combined with supportive factors in the near term i.e., a cheaper valuation, an increased short base on the Bund future, a decoupling with a falling expected volatility on rates, and the start of the bullish seasonality," MS said.
U.S. Markets:
Stock futures were muted as investors awaited fresh inflation figures due out later this week.
Other than the CPI reading, it's a slow start to the week for economic updates, with just the New York Fed 1-year and 5-year inflation expectations survey due for release today.
Stocks to Watch
Shares of Meta were rising 0.9% following a report from the Financial Times that said the parent company of Facebook has delayed finalizing multiple teams' budgets while it prepares a fresh round of job cuts.
Nikola gained 1.2% as the company has started work on hydrogen plants, WSJ reported .
Forex:
The euro should appreciate against the dollar over the course of 2023 but a rebound looks unlikely this week, ING said.
A rather low U.S. inflation figure tomorrow would be required to send EUR/USD sustainably back above 1.0800-1.0850, ING said.
"We see a greater chance of the pair [EUR/USD] coming under some additional pressure, and a strong U.S. consumer price index read could mean the 1.0500 support (1.0490 is the 2023 low) is tested."
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The dollar could fall if tomorrow's U.S. inflation data are lower than expected but any declines will be short-lived, Commerzbank said.
A sustained dollar depreciation would require more than one set of data that illustrate a pronounced economic slowdown caused by past interest rate hikes, which might dampen the Federal Reserve's hopes for a soft economic landing, Commerzbank said.
"Only at that stage would it be justified in my view for the market to increasingly rely on the Fed moving in its direction, which would then put pressure on the dollar," it added, noting market expectations for rate cuts later this year.
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Polish President Andrzej Duda's refusal to sign the judicial reform legislation the country needs to pass to access EU funds creates uncertainty that might keep the Polish zloty under pressure in coming months, Commerzbank said.
Duda on Friday said he doubted the legislation and referred it to the Constitutional Tribunal for review. In-fighting within the tribunal makes the outcome of this review additionally uncertain, Commerzbank added.
"This source of risk will continue to plague the Polish exchange rate in coming months."
Bonds:
Eurozone government bond yields were little changed with tomorrow's U.S. inflation data seen as the next potential driver.
"After being under pressure in the past few days, European fixed-income assets will face another test tomorrow with the release of U.S. CPI," UniCredit Research said.
Investors are likely to adopt a wait-and-see stance ahead of the data, it said.
Energy:
Oil prices edged lower as investors awaited the U.S inflation report.
Metals:
Base metals prices were mixed, while gold was flat in early trading, as markets looked to tomorrow's U.S. CPI print.
An upside surprise could be a "wrecking ball" for risk assets like commodities after a slowdown in inflation provided investors with some optimism of a soft landing, SPI Asset Management said.
Gold Outlook
Gold prices are likely to remain volatile in the near-term, according to ANZ Research, with changes in Fed policy likely to cause price fluctuations for the precious metal.
ANZ pointed out that unemployment is historically low, and inflation remains above the Fed's target range.
"This could keep the Fed hawkish."
If the economic backdrop is to improve, that could mean further rate hikes which would be a strong headwind for gold and would create "short-term ripples" in the market, ANZ said.
ANZ added that prices falling below $1,800 a troy ounce in the short term might be likely because of this, with prices today at $1,874 an ounce.
DOW JONES NEWSPLUS
EMEA HEADLINES
EU Lifts Forecasts for Eurozone Growth as Inflation Eases
The eurozone economy is expected to grow at a faster pace than previously anticipated this year, avoiding technical recession, but the outlook remains weak with inflation and sharp interest-rate increases set to weigh on activity.
The European Commission said Monday in its quarterly forecasts that gross domestic product in the eurozone is expected to grow 0.9% in 2023, higher than the 0.3% increase anticipated in November.
Nissan Motor, Renault to Invest $600 Million in India
Nissan Motor Co. and Renault S.A. plan to invest about $600 million in India to produce six new models, including two electric-vehicle models, the companies said Monday.
The six new models will comprise of three for each company on common platforms and will be engineered and built in Chennai, India, the French and Japanese auto makers said.
Anglo American Platinum Warns of 2022 Fall in Headline, Basic Earnings on Higher Costs
Anglo American Platinum Ltd. warned Monday that 2022 headline and basic earnings were expected to fall due to higher mining and processing costs stemming from inflationary pressures.
The South African precious metals company-which is majority owned by Anglo American PLC-said this was driven by a 26% decrease in the sales volumes of platinum group metals and despite a 2% rise in the rand basket price.
Galp 4Q Earnings Rose on Higher Oil Prices
Galp Energia SGPS SA on Monday reported a rise in earnings for the fourth quarter of last year, as favorable oil prices boosted its business.
The Portuguese energy company registered a quarterly net profit of 455 million euros ($485.9 million), up from EUR106 million in the year-earlier period.
Louis Vuitton's Formula for World Domination
PARIS-Louis Vuitton constructed a vast makeshift warehouse in the courtyard of the Louvre to house its recent menswear show. Hundreds of K-pop fans trying to get a glimpse of star Jung Hoseok, better known as J-Hope from BTS, lined the streets.
The guest list was designed to attract global attention: Hong Kong pop singer Jackson Wang, Los Angeles rapper Tyga and Mia Khalifa, a Lebanese-born pornographic actress turned social-media influencer. J-Hope, Usher and "Emily in Paris" actor Lucien Laviscount took their front-row seats not far from Bernard Arnault, the chairman and chief executive of LVMH Moët Hennessy Louis Vuitton SA, together with his wife and four of his five children, all of whom work for the company.
London Is Losing Its Crown as a Luxury Shopping Destination
U.S. tourists can get a much better deal on a new Louis Vuitton handbag in Paris than in London. It is becoming a problem for the British capital and its home-grown luxury brands.
(MORE TO FOLLOW) Dow Jones Newswires
02-13-23 0612ET
