MARKET WRAPS
Stocks:
European stocks mostly traded in positive territory on Monday at the start of a busy week for investors.
Wednesday's U.S. inflation data for March and Thursday's interest-rate decision by the European Central Bank are likely to take center stage as investors remain uncertain about when the ECB and the Federal Reserve will start cutting interest rates.
Economic Data
Industrial data out of Germany is already pointing toward the end of stagnation in the first quarter, ING said, adding the 7.9% surge in activity in the construction sector is particularly encouraging.
Meantime, Pantheon Macroeconomics said the rise in production for February means output surely rose in the first quarter, which would go a long way to support GDP growth.
Stocks to Watch
Copco shares have underperformed the sector by 5% year-to-date due to skepticism around the semiconductor recovery, tough comparables in its gas and process business and China weakness in autos, Citi said.
However, Citi notes the stock is not reacting much to better contracting of LNG vessels.
"Based on our LNG model, we have increased our gas and process orders through 2024; combined with better FX, this is driving 3%-4% EPS upgrades."
Citi thinks consensus orders remain too low for 2024, saying although there is probably downside to orders in industrial technique from the China weakness, it is a relatively small part of the group. The bank rates Atlas Copco at buy with a SEK205 target price.
Deutsche Bank expects Carlsberg to reiterate full-year guidance at its first quarter results later this month for 1%-5% organic Ebit growth, but believes there is upside to this as the year progresses.
For the first quarter, Deutsche Bank now expects organic beer volume growth of 3%, having previously modeled 0.5% growth, with organic sales growth of 6.3% having previously expected 0.7%.
It now sees 1Q price/mix growth of 3.5% from 0.9%. For the full-year, its beer volume expectation is unchanged, its organic sales growth estimate increases and its organic Ebit growth estimate increases slightly.
Deutsche Bank rates Carlsberg at buy and lifts its target price to DKK1,100 from DKK1,080.
U.S. Markets:
Stock futures edged lower while benchmark Treasury yields rose, building on Friday's gains.
This week, results are due from some of the country's biggest banks and asset-management firms, including JPMorgan Chase, Wells Fargo and BlackRock.
There will also be inflation data that are likely to influence the Federal Reserve's interest-rate plans.
Stocks to Watch
Tesla plans to unveil its Robotaxi in August, Elon Musk said late last week. Shares rose 3.8% in premarket trading.
Coinbase Global shares advanced nearly 5% premarket, rising alongside the price of bitcoin. On Monday, the cryptocurrency traded above $71,000, up about 10% from its low last week.
Forex:
The week could prove pivotal for the direction of the dollar through the rest of April with the latest U.S. CPI and PPI reports due for release, MUFG said.
"After U.S. inflation surprised to the upside in January and February, it will be harder to look through another upside surprise in March."
Barclays said the release of another strong U.S. employment report for March casts fresh doubts on the need for the Federal Reserve to begin cutting interest rates as soon as June.
CBA said most of the dollar's weakness versus the yen is likely to be in the second half, when the Fed's rate-cut cycle begins.
The narrowing of U.S.-Japan rate differentials should weigh on USD/JPY, while oil prices should move lower, which should support Japan's current-account surplus and undermine USD/JPY, CBA said.
However, these factors are likely to be partially offset by improvement in risk sentiment driven by global rate-cut cycle, it adds. Given CBA's updated Fed and BOJ policy outlooks, it raises USD/JPY quarterly forecasts for rest of 2024 and for 2025.
CBA sees USD/JPY at 142.00 vs. 137.00 previously for December 2024 and at 133.00 vs. 130.00 previously for December 2025.
Bonds:
German Bunds won't be immune to rising Treasury yields Commerzbank Research said as it sticks to a cautious duration stance, adding yields may erode the upper end of the recent range around 2.45%.
That said, Bunds should continue to outperform Treasurys, it said.
The short-end of the euro curves looks better anchored as the European Central Bank, which meets on Thursday, seems poised to indicate that interest-rates could start to fall from June.
March had $5.2 billion of Treasury notes and bonds stripped, where a bond's principal and coupon payments are broken up and sold separately to investors, Barclays Research said.
Most of the activity concentrated in 2053-dated issues, it said, adding that stripping activity for May 2053 bonds has accelerated in recent months. Stripping activity remained above historical monthly averages in March though slightly moderated compared with February.
Energy:
Oil prices fell more than 1% after Israel and Hamas sent delegations to Egypt for fresh talks over a potential ceasefire in Gaza six months into the war.
According to media reports citing an Egyptian state-linked outlet, talks in Cairo have made significant progress. Meanwhile, Israel reduced the number of troops in southern Gaza to prepare for future operations.
"Geopolitical risks have certainly grown, particularly when it comes to Israel and Iran, which has left the market nervous," ING said.
"However, any premium priced into the market will eventually erode in the absence of any escalation."
Traders await key oil-market reports this week for supply and demand forecasts.
Brent crude oil prices are forecast to stay below $100 a barrel this year on expectations of solid demand and no additional hits to supply from geopolitical escalations, according to Goldman Sachs.
It forecasts demand growth of 1.5 million barrels a day--above estimates provided by the International Energy Agency--and said it expects OPEC+ to raise production by 1.2 million barrels a day from July through November.
"We assume that OPEC+ won't push oil prices to extreme levels because the 2022 energy crisis showed that extreme prices destroy long-term residual demand for OPEC barrels by boosting non-OPEC supply and capex in alternatives to oil."
BIMB Securities said Brent may rise to $95--$105/bbl near term given likely higher demand and supply shortages,
It said the IEA has revised its oil demand growth upward due to increased bunker fuel demand resulting from the Red Sea crisis. IEA has reduced its oil supply estimate amid expectations of rollover in OPEC+ production cuts until end-2024, BIMB noted.
Metals:
Gold futures rose as bubbling tensions in the Middle East continued to offset falling interest-rate cut hopes.
The precious metal had hit a record $2,372.5 an ounce earlier in the session, and is up nearly 14% in the year to date. Its prices continue to buck the status quo, rising even as expectations for three interest-rate cuts from the Federal Reserve continue to fall, Capital.com said.
"Gold's correlation to real rates, and, by extension, the dollar, has diminished significantly recently, suggesting gold's uptrend is a likely geopolitics story, compounded by momentum chasing by speculators."
EMEA HEADLINES
German Industrial Production Beat Expectations in February
Germany's industrial production rose more than expected in February, helped by a recovery in the construction and car industry, as the country looks to exit a recent manufacturing slump.
Output of production in manufacturing, energy and construction ticked up 2.1% compared with the previous month, on a seasonally and calendar-adjusted basis, from an upwardly revised 1.3% rise in January, according to data published Monday by German statistics office Destatis.
Spain's Puig Intends to Go Public
Spanish perfume, fashion and make-up company Puig said it intends to launch an initial public offering on Spanish stock exchanges.
The owner of the Jean-Paul Gaultier and Nina Ricci fashion houses confirmed the plan on Monday after months of rumors about a potential stock-market listing of the Barcelona-based group. It didn't say when it expects shares to start trading or how much it plans to raise as part of its IPO.
Luxury Brands Go Shopping for Upmarket Boutiques
There's no commercial real estate crash on New York's Fifth Avenue or the Champs-Élysées in Paris.
Luxury brands are racing to buy properties on the world's most famous shopping streets. One reason is the fear that, if they don't buy their flagship store from the landlord, one of their rivals will do so and send them packing.
GLOBAL NEWS
Doubts Creep In About a Fed Rate Cut This Year
After the latest blockbuster jobs report Friday showed continuing strength in the economy, more traders are betting the Fed may cut the benchmark federal-funds rate just once or twice this year, fewer than officials' last median forecast of three quarter-point cuts. And a handful are even starting to wager that the central bank will leave rates where they are.
Earnings Season to Test Stock-Market Rally
Stocks have been on a tear this year. The coming earnings season will show investors whether corporate profits are backing up the market rally.
The S&P 500 has increased 9.1% year to date and is trading near all-time highs. It just clinched its best first-quarter performance since 2019.
Israel Kills a Hezbollah Commander, as Gaza Cease-Fire Talks Show Progress
Israel killed a Hezbollah commander in an airstrike on southern Lebanon early Monday, extending its campaign against the Iran-backed group while talks on an elusive Gaza cease-fire deal showed signs of progress.
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04-08-24 0543ET
