MARKET WRAPS

Stocks:

European stocks struggled for momentum on Monday, largely languishing around the flatline, after Jerome Powell said in a television appearance that the Federal Reserve was approaching the "question of when to begin to reduce interest rates carefully" and that the first cut might not come in March as many had anticipated.

Powell said Fed officials were trying to balance the risks of leaving rates too high for too long, which could cause an economic slowdown, and of cutting rates too soon and allowing inflation to settle above the Fed's 2% goal.

Even if...Powell hadn't poured cold water on the prospect of a March rate cut at his press conference last week, Friday's payrolls numbers would probably have done that all by themselves," CMC Markets UK said.

"Nonetheless Powell went on to reiterate this message of a careful approach to rate cuts yesterday in an interview with CBS."

Stocks to Watch

National Grid's growth outlook has received a significant boost from the U.K.'s plan to overhaul its transmission grid, Jefferies said, lifting its rating and price target on the stock to buy from hold and to 1,330 pence from 1,000 pence.

U.S. Markets:

S&P 500 futures slipped after index reached its seventh record close of the year on Friday

Stocks to Watch

Boeing said it would have to rework 50 undelivered 737 MAX jets after an employee of Spirit AeroSystems, a Boeing supplier, discovered misdrilled holes on some fuselages. Shares fell around 1.5% premarket.

Tesla fell 1.6% premarket, on track to extend the stock's bad run this year. Tesla shares are down 24% in 2024 through Friday, a sharp contrast to the performance of other growth companies.

Earnings are due from Caterpillar, McDonald's, Palantir Technologies and Tyson Foods.

And there's more economic data in store, coming from the ISM services report. That report last month triggered worries about the economy after an unusually low reading for the employment component.

Forex:

Friday's bumper U.S. jobs data have knocked the possibility of a rate cut by Fed as early as March "off the table" and this has caused EUR/USD to extend losses and fall under 1.08, ING said.

Steep losses from here are unlikely given the current very low volatility environment, though it's possible that EUR/USD could drop towards 1.07, ING said.

This would likely be a function of dollar gains rather than euro falls given that the eurozone data calendar is relatively light this week.

BofA Global Research said weaker U.S. economic data and interest-rate cuts by the Fed will both be necessary for the dollar to weaken, and this is likely to take longer to materialize than markets expect.

It forecast EUR/USD will fall to 1.07 in the first quarter, then rise to 1.15 by year-end, "assuming the U.S. economy slows from here and the Fed starts to cut rates in June."

Combined with improved risk appetite, this should mean the dollar weakens even if Fed rate cuts are slower than current market pricing suggests, BofA said.

Bonds:

The Bund yield is expected to trade in a tight 2.18%-2.24% range in February, according to Morgan Stanley, with a moderation in issuance pressures and positive seasonality factors seen supporting duration, assuming the continuation of a strong data string doesn't lead to a sustained repricing of cumulative interest-rate cuts.

"February should remain a month of range-bound trading on duration, with a potential good entry-point for outright exposure at around the 2.30%-2.35% area on the 10-year Bund, with seasonals and the supply picture being more supportive for duration more broadly."

Barclays Research said a light data calendar and sporadic central bank speak this week allow time for some "soul-searching" for fixed income, with all the attention remaining on the pricing of central banks' rate-cut path.

"For now, central banks are in risk-management mode and they are willing to be patient. While the recent data trajectory could validate the Fed's wait-and-see approach, the same may not be so obvious for the European Central Bank, the growth and inflation projections of which are too high, in our view."

Energy:

Oil prices edged higher following fresh attacks on Houthi targets over the weekend and a series of U.S. retaliatory airstrikes in Syria and Iraq, ANZ said.

"The oil market is largely balanced in 1Q and OPEC is sitting on a large amount of spare capacity, leaving the market fairly comfortable," ING said.

"However, this could quickly change if tensions spread to other parts of the Middle East."

Metals:

Base metals and gold prices weakened on a strengthening dollar after Jerome Powell said he expected rate cuts but played down expectations they would arrive soon.

This follows on from Friday's non-farm payroll reading blowing past expectations and restating the strength of the U.S. economy--lowering the chances of a March rate cut further and sending the dollar and yields soaring, IG said.


EMEA HEADLINES

UniCredit Shares Jump on Plan to Boost Shareholder Returns, Outlook Upgrade

UniCredit shares jumped after the Italian bank said it plans to boost its capital distributions to shareholders and upgraded its 2024 profit outlook.

At 0906 GMT on Monday, shares in UniCredit traded 9.8% higher at EUR29.30. This took its gain over the past year to nearly 63%, against a 5.9% rise in the Stoxx Europe 600 Banks index in the same period.


Atos Shares Tumble After Request to Appoint Third Party to Assist in Refinancing Talks

Shares in Atos plunged after the company said it has requested the appointment of an independent third party to assist it in talks with banks to refinance its debt.

At 0902 GMT shares traded 24% lower at EUR2.97.


Vodafone Group Revenue Falls After Sale of Hungarian Business

Vodafone Group third-quarter revenue fell due to the sale of its Hungarian unit despite further growth at its business segment.

At 0924 GMT, shares were down 0.55 pence, or 0.80%, at 68.05 pence. Over the twelve past months, shares are down 25.4%


Santander, Lloyds shares fall on report Iran used banks to evade sanctions

Shares of Banco Santander and Lloyds Banking Group dropped after a report that Iran used the two banks to evade sanctions.

Santander shares ES:SAN SAN skidded 5%, and was the worst performing Stoxx 600 stock in early trade. Lloyds UK:LLOY LYG fell 1%.


Societe Generale to Cut 900 Jobs in Cost-Savings Push

Societe Generale plans to cut about 900 jobs at head office, or around 5% of its head-office staff, as part of a reorganization that aims to reduce costs.

The French bank said Monday that job cuts would take place without forced departures and that its plan is being submitted for consultation with the staff representative bodies.


Nordea Raises Dividend, Aims to Grow Income Faster Than Costs in 2024

Nordea Bank on Monday raised its dividend and said it aims to again grow its income faster than its costs this year.

The Helsinki-based bank posted net profit attributable to shareholders of 1.11 billion euros ($1.19 billion) for the fourth quarter, compared with EUR1.27 billion in the same period a year earlier, as net interest income rose 19% to EUR1.95 billion.


Germany's Trade Surplus Widened in December

Germany's trade surplus widened a little more than expected in December, with imports falling more sharply than exports, as annual figures showed the fragile condition of the country's economy.

The eurozone's largest economy booked an adjusted trade surplus-representing the difference between exports and imports of goods-of 22.2 billion euros ($23.95 billion), climbing from EUR20.4 billion in November, according to figures published Monday by federal statistics agency Destatis.


It's shaping up to be a great quarter for Europe's biggest companies - no thanks to Europe.

Fourth-quarter earnings season in Europe is still in its early days, but the largest companies on the Continent are mostly hitting their stride.

Novo Nordisk NVO, the maker of wildly popular weight-loss drugs, on Wednesday beat estimates and gave an outlook that suggested analysts will have to hike their outlooks further. LVMH Moet Hennessy FR:MC, the luxury giant, reported faster-than-expected sales growth and surprising cost control. ASML Holding ASML, the maker of microchip-making equipment, reported faster-than-expected order growth even as its exports are hamstrung by U.S.-China tech wars. SAP SAP, the German database provider that is an arch-rival to Oracle, boosted its profit outlook.


GLOBAL NEWS

Powell Says Fed Has New Focus: When to Cut Rates

Federal Reserve Chair Jerome Powell said the central bank has shifted its focus toward deciding when to begin cutting interest rates, but that solid economic growth means officials don't have to rush that decision.

Given recent economic strength, "we feel like we can approach the question of when to begin to reduce interest rates carefully," Powell said during a rare television interview broadcast on CBS on Sunday night.


Big Tech Stocks Find Little Room for Error After Monster Run

Investors have a simple request for tech titans this earnings season: Nothing less than perfection.

The "Magnificent Seven" group of tech companies has been the stock market's biggest engine for growth and profits over the past year. But after five of the companies turned in strong quarterly results last week, investors are being picky about which ones they reward.


U.S. Plans Further Action Against Iran's Militia Allies

The U.S. and U.K. launched a fresh wave of strikes against Iran-backed Houthi rebels in Yemen in response to their attacks on international shipping in the Red Sea, as Secretary of State Antony Blinken prepared to head to the Middle East in hopes of brokering a pause in Israel's war in Gaza.

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02-05-24 0538ET