MARKET WRAPS
Stocks:
European stocks traded higher on Friday, tracking tech-inspired gains in global markets.
Stocks to Watch
Barclays needs to be crystal clear at its upcoming strategy update, Jefferies said after the bank's CEO sent mixed signals about its investment-banking branch--a hot topic for investors--at the World Economic Forum in Davos, Switzerland.
"Clarity on strategy + capital consumption + returns is needed at the update on 20 Feb," Jefferies said.
It also called for more details on the timeline for structural-cost actions the lender has previously announced and their net effect on its cost base.
Integrated oil companies will likely still offer attractive shareholder returns despite weaker oil and gas prices and refining margins putting pressure on EPS estimates and buyback levels near-term, Berenberg said.
"We believe that this could leave attractive entry opportunities into cheap and high-yielding companies if the environment improves later in the year," it said.
Shell, TotalEnergies and Eni remained the bank's top picks.
Economic Insight
The slowdown in shipping in both the Red Sea and the Black Sea has created new stress and added upward pressure to prices in commodities like grains and oil.
"The attacks have had consequences for the global economy as they have effectively closed off the Red Sea - one of the main trade routes for container ships," John Stewart and Associates said.
U.S. Markets:
Stock futures edged higher while Treasury yields held Thursday's gains, after settling at their highest close of the year.
More regional bank earnings are due, plus home sales for December and consumer sentiment data.
Stocks to Watch
Advanced Micro Devices rose 2% in premarket trading and Nvidia was up 1.4% after shares of both closed at all-time highs on Thursday.
iRobot plunged 36% after WSJ reported the European Commission intends to block Amazon.com's acquisition of the Roomba maker.
Forex:
Sterling fell after data showed U.K. retail sales fell by 3.2% during December, much more than expected and reversing some of the recent gains after higher inflation data dampened prospects for Bank of England interest-rate cuts.
The data suggest the U.K. economy "certainly isn't out of the woods," Wealth Club said.
"Whether December's weak retail sales are a blip or the start of a more worrying trend remains to be seen."
The dollar is likely to stay stuck in a tight range for now as market participants await key interest-rate announcements by the Bank of Japan and the European Central Bank next week and by the Federal Reserve on Jan. 31, UniCredit Research said.
Investors are likely to wait for these key events "before riding more sustained trends," it said.
UniCredit expects, however, that the dollar will continue to retain a "bullish bias," with the DXY dollar index remaining firm at close to 103.50.
Bonds:
Gilt yields declined following the weak U.K. retail sales data.
"We expect the numbers will drive a bid in gilts, which have been trading very soft since Wednesday's CPI release," Mizuho said.
Energy:
Crude prices inched higher as extreme cold disrupted U.S. oil production and Middle East tensions grew amid a new round of U.S. strikes against Houthi anti-ship missiles.
"Sustained disruptions to Red Sea flows will increase the pressure on energy markets over time," BMI Research said. Yet, "energy-price action has been fairly muted in response to the crisis."
According to BMI, the market sees risks of a broader conflict and supply disruptions as unlikely or limited.
Metals:
Base metals traded higher as the dollar eased, while gold rose on heightened geopolitical risks.
"Heightened geopolitical risks should support haven investment in gold," ANZ Researchsaid.
"But waning market expectations of early rate cuts by the Fed and a rebound in the USD are likely to limit the upside."
EMEA HEADLINES
BASF Sales, Earnings Miss Forecasts on Lower Margins, Write-Downs
BASF said Friday that its 2023 results missed expectations, dragged by impairments and lower margins that weren't offset by cost cuts.
The European chemicals giant's key profit figure-earnings before interest, taxes and special items-fell to 3.81 billion euros ($4.14 billion) from EUR6.88 billion, compared with a EUR4 billion-EUR4.4 billion forecast range and an analyst consensus estimate of EUR3.93 billion.
Deliveroo Sees Earnings Slightly Ahead of Guidance
Deliveroo said fourth-quarter gross transaction value growth was in line with previous guidance.
The food-delivery company said Friday that for the three-month period ended Dec. 31, gross transaction value rose 4% on a constant currency basis from a year earlier to 1.85 billion pounds ($2.35 billion).
The Red Sea Conflict Is Scrambling Shipping. Europe Is Bearing the Brunt.
For the second time in three years, a conflict in Europe's unruly neighborhood is threatening to weaken an already struggling economy while a more robust U.S. is watching from a safer distance.
This time, attacks by Houthi rebels in Yemen targeting cargo ships in the Red Sea have persuaded more carriers to opt for the safer but longer and more expensive journey around Africa via the Cape of Good Hope.
GLOBAL NEWS
A Hot Debt Market Is Slashing Borrowing Costs for Riskier Companies
Companies with low credit ratings are rushing to slash their borrowing costs even before the Federal Reserve makes a single interest-rate cut.
As of Thursday morning, companies such as SeaWorld Entertainment and Dave & Buster's had asked investors to cut the interest rates on some $62 billion of sub-investment grade loans in January-already the largest monthly total in three years, according to PitchBook LCD.
AI Is the Talk of Davos. Is It Time to Sell?
The mood of the global elite meeting in Davos, Switzerland, is a useful indicator for investors-as long as they do the opposite.
When the elite are depressed, buy. When they're positive, sell. When they're focused on crypto, as in 2021, get out. This year it was impossible to move in the snow-blanketed resort without having artificial intelligence pushed at you.
North Korea's Missiles Are Being Tested on the Battlefields of Ukraine
SEOUL-One of the world's biggest illicit-arms suppliers just got a major advertisement.
In recent weeks, Russian forces have fired short-range ballistic missiles in Ukraine provided by North Korea, according to assessments from Washington, Seoul and Kyiv. Pyongyang has provided Moscow with dozens of the weapons, the U.S. says.
China's Strongest Ally in Taiwan Is Weaker Than Ever
TAIPEI-Beijing's closest political partner in Taiwan is fighting to remain relevant in an island democracy where voters increasingly see a future that is detached from an authoritarian China.
The Kuomintang, or Nationalist Party, once governed China and had dominated Taiwanese politics for decades. It is now on its longest losing streak in presidential elections since this self-ruled island started choosing its leader by popular vote, consigned to a third straight term in opposition.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-19-24 0550ET
