MARKET WRAPS
Stocks:
European stocks were little changed on Friday in a quiet day for news.
London's FTSE 100 "hasn't budged enough to take the market into the green for the week, with relatively limited corporate news around to move the needle," Hargreaves Lansdown said.
"Today, the focus is on updated seasonal patterns for CPI inflation in the U.S.," SEB said.
The potential revisions to inflation numbers often matter little, but last year were large enough to raise questions about the inflation path.
Shares on the Move
Hermes jumped around 4% after the Birkin bag maker reported a surge in quarterly sales, despite a slowdown in the sector.
L'Oreal's profit missed investors' expectations, driving its shares down 7%.
Ubisoft rose 16% after it said net bookings for the current quarter should be up sharply, leading to what it said would be record sales for the fiscal year through March.
Norway Interest Rates
Norwegian core inflation fell slightly more than Norges Bank had forecast, but the deviation is too small to affect the interest-rate outlook, Handelsbanken said.
There's no reason for Norges Bank to be in more of a hurry to cut interest rates, it said.
Although global inflationary impulses are diminishing, domestic price pressure is still very strong. Core inflation fell to 5.3% in January, while Norges Bank had looked for 5.4%.
Handelsbanken thinks the major central banks must start cutting rates before Norges Bank follows. It expects rate cuts from the Federal Reserve and European Central Bank in 2Q.
"Thus, we look past the summer holidays before we assume the first cut from Norges Bank."
U.S. Markets:
Stock futures pointed mostly higher after the S&P 500 topped 5,000 for the first time during intraday trading on Thursday but ended the session just below the mark.
Stocks to Watch
Pinterest reported fourth-quarter revenue that slightly missed Wall Street estimates and adjusted profit of 53 cents a share that exceeded expectations by 1 cent. Shares were falling 11%.
Take-Two Interactive Software reported fiscal third-quarter adjusted revenue, or net bookings, that were in line with analysts' estimates, but the revenue guidance for the fourth quarter of between $1.27 billion to $1.32 billion missed estimates of $1.51 billion. The stock declined 7.6%.
Forex:
Major currencies traded within familiar and relatively narrow trading ranges with no clear-cut direction, UniCredit Research said.
The DXY dollar index was flat, EUR/USD traded flat, while GBP/USD edged up.
"Range-bound activity is...set to prevail again in the absence of news from the ECB members speaking today and a break of key levels on charts."
Annual U.S. CPI revisions--consisting of revised monthly CPI figures for the past five years--are due on Friday and are one of the key risks of the week, potentially moving the dollar, ING said.
"There is a case to be made that the market will move on today's benchmarks." An upward revision would prompt a modest back-up in short-term U.S. rates and support the dollar.
Alternatively, no material revisions could give the Fed more confidence in last year's trend of slower inflation, potentially weakening the dollar, ING said.
A fall below 104.00 could see the DXY drop towards 103.20, it said.
Bonds:
Yields have moved higher again, following upbeat U.S. data and a general push-back against immediate interest-rate cuts, and the rise in yields is offering buy-on-dip opportunities for bonds, Societe Generale Research said.
"Even if an overshoot in yields is possible, the shifting risk perception for fixed income should eventually prevail."
With inflation expected to moderate further, monetary policy is too restrictive and warrants adjustment, SocGen said.
The current level of 2.35% for the 10-year Bund yield is SocGen's baseline for the first quarter, but it sees an upside risk of an increase to 2.50%, "which would be a clear buying opportunity to us."
Additionally, SocGen said the risk of a sharp widening in eurozone sovereign government bond spreads is probably limited, despite weak fiscal metrics.
It attributed this view to the fact that the pace of quantitative tightening under the ECB's Pandemic Emergency Purchase Programme will be light, while the risks of a political crisis are relatively low.
Citi Research lowered its forecast for the 10-year Italian BTP-German Bund yield spread to 130 basis points later this year, even as breaking below 150bps looks difficult at the moment.
Energy:
Oil futures were stable, heading for weekly gains after rising over 3% on Thursday on concerns over a prolonged conflict in the Middle East.
The rally was sparked by fears of further escalation in the region after Israel rejected Hamas's proposed terms for a cease-fire in Gaza, crashing market hopes for an imminent truce and hostage-release deal.
Meanwhile, broader strength in refinery margins is providing further support to oil prices amid larger-than-expected draws in U.S. fuel stocks last week, Red Sea disruptions and refinery outages in Russia, according to analysts.
Metals:
Base metals and gold prices slipped on deflationary pressures and a strong dollar.
The firm dollar has kept a lid on any gains for gold, despite safe-haven demand as Middle East tensions continue to bubble over.
Meanwhile Chinese deflation has persisted as the economy struggles to gain momentum, with the CPI falling at the fastest pace since 2009 in January--prompting a drop in base metal prices, analysts said.
Zinc
The price of zinc has fallen too far and should claw back some of its losses in the days ahead, Sucden Financial said.
LME 3-month zinc broke below what had been a strong support level at $2,380/metric ton after China data Thursday fanned deflation fears, leading to an accelerated selloff as put options were exercised.
Iron-Ore
Iron-ore prices were holding up well given the weakness in Chinese steel demand and sentiment, Liberum said, which expects another busy restocking cycle when traders return from the Lunar New Year holiday.
EMEA HEADLINES
Barclays To Buy Tesco's Banking Operations For Around $760 Million
British lender Barclays has agreed to buy Tesco's retail banking arm for a consideration of around 600 million pounds ($757 million) in a deal that allows the U.K. grocer to focus on its core food offering and return cash to shareholders.
Barclays UK will take over Tesco Bank's operations in credit cards, unsecured personal loans and deposits, as well as its operating infrastructure, the companies said on Friday. This includes around GBP8.3 billion of unsecured lending balances and around GBP6.7 billion in customer deposits.
UBS Loses to Whistleblower in Wide-Reaching Supreme Court Decision
A UBS unit must provide back pay to a former analyst who said he was fired for blowing the whistle on illegal pressure to change research reports, the U.S. Supreme Court said in a unanimous decision Thursday that will make it easier for whistleblowers to win retaliation lawsuits.
Whistleblowers don't have to prove they were terminated because of "retaliatory intent," the Supreme Court said in its decision, reinstating a win at trial for analyst Trevor Murray.
Saab Earnings Beat Forecasts as Global Defense Spending Continues
Saab posted a forecast-beating rise in fourth-quarter earnings and raised its dividend as global defense spending continues to surge.
The Swedish defense company posted a net profit in the quarter of 1.22 billion kronor ($116.5 million) compared with SEK1.12 billion a year earlier, while sales rose 16% to SEK16.12 billion.
GLOBAL NEWS
Can Dividend Investing Rise From the Dead?
Amid a confusion of artificial-intelligence narratives, "quant" analyses, and sustainable funds, the oldest and simplest stock-picking strategy-dividend investing-lies almost forgotten. There might be ways to dust it off.
Ever since the 2008-09 financial crisis, investors have sneered at getting cash back. U.S. equities with dividend yields above 5% have returned roughly 450% since the end of 2008, below the 640% gain of the wider S&P Composite 1500. No-dividend stocks have returned almost 1,200%.
Market May Be Too Optimistic on Fed Rate-Cut Outlook
SYDNEY-The market is pricing in multiple interest-rate cuts by the Federal Reserve through 2024, but the current expectation could be overly optimistic and may drag on stocks if not realized.
That is the view of Catriona Burns, the lead portfolio manager of a listed investment company run by Wilson Asset Management. Burns thinks the market may be getting ahead of itself by pricing in as many as six rate cuts in the U.S.
Cease-Fire Emerges as Key to Israeli-Saudi Normalization
The Biden administration believes it is still possible to broker a historic normalization deal between Saudi Arabia and Israel, but the window for an agreement is closing with fighting still under way in Gaza and the U.S. presidential campaign ramping up.
Saudi Arabia won't agree to move forward until a cease-fire is in place, but talks to halt the conflict have stalled, according to U.S. and Saudi officials.
Ukraine-Israel Aid Package Clears Major Hurdle in Senate
WASHINGTON-The Democratic-controlled Senate cleared a critical hurdle toward passing a $95 billion national security-focused bill aimed at fortifying Ukraine, Israel and other allies, voting to move to debate an issue that has divided Republicans for months.
The vote was 67-32, above the 60-vote bar needed to advance most legislation in the chamber. Seventeen Republicans backed the measure, along with all but one member of the Democratic caucus. The Republican "no" votes reflected both opposition to further funding Ukraine and a desire by some to relitigate a fight over illegal immigration that has been entangled with the foreign-aid package for months.
Biden Knowingly Kept and Shared Classified Material, Special Counsel Concludes
(MORE TO FOLLOW) Dow Jones Newswires
02-09-24 0556ET
