MARKET WRAPS
Watch For:
CPI data for Germany, Baden-Wuerttemberg, Hesse, Brandenburg, Bavaria, North Rhine Westphalia, Saxony, France; Services PMI data for Eurozone, U.K., France, Germany, Italy; U.K. Money and Credit; trading updates from Next
Opening Call:
European stock futures were treading water early Thursday. Asian stock benchmarks were broadly lower; the dollar weakened slightly; Treasury yields were little changed; oil futures and gold advanced.
Equities:
European stock futures were little moved after a negative lead from Wall Street overnight.
U.S. stocks finished lower Wednesday after minutes from the Fed's December meeting showed policymakers had a high level of uncertainty around their interest-rate projections.
The minutes showed that officials agreed that the rate-increase cycle that started in 2022 was likely at an end but offered no timetable on cuts.
Officials have signaled that the Fed cut interest rates three times this year while interest-rate derivatives traders have placed bets implying about six cuts in 2024.
"There remains a wide gap between market expectations and what the Federal Reserve has communicated," said Bill Northey, senior investment director at U.S. Bank Wealth Management.
As a result, coming data releases, like December's jobs report due Friday and inflation data scheduled for next week, could spark major moves in markets, he said..
Forex:
The U.S. dollar weakened slightly.
The dollar could rise over the next one to three months as the market reassesses significant expectations for U.S. interest-rate cuts this year, Rabobank said.
In December, the Fed signaled around three 25 basis-point rate cuts for 2024, but the market is currently looking for about twice that, it said.
"With so many Fed rate cuts currently in the price, we envisage that the dollar could strengthen on a 1-to-3-month view vs a basket of currencies."
The dollar should end the year softer, however, due to rate cuts and improved risk appetite, it added.
Bonds:
Treasury yields were little changed after finishing lower on Wednesday, as minutes from the Federal Reserve's December meeting raised uncertainty about the path of monetary policy in 2024.
Jeffrey J. Roach, chief economist at LPL Financial, said the minutes show that Fed officials realize the "incredible amount of uncertainty" surrounding the macro landscape and want to keep their options open.
The minutes also imply the Federal Open Market Committee will "likely hold rates steady" in March but will start preparing the markets for a cut later in the year should economic growth falter, Roach said.
Energy:
Oil continued to rise after reports of fatalities on Wednesday following explosions at a ceremony held to mark the fourth death anniversary of an Iranian military officer.
Prices also found support on the back of reports that Libya's largest oilfield has been shut down due to protests.
Overall, the oil market seems "likely to be in rough balance, but uncertainty about supplies abound - from sanctions on Iran, Russia and Venezuela having less effect, to the possibility that [U.S. President Joe] Biden will try to tighten them," said Michael Lynch, president of Strategic Energy & Economic Research.
Meanwhile, Angola quitting the OPEC as a member is raising concerns that the "group might be having increasing trouble maintaining prices," said Lynch.
"The Saudis are carrying most of the burden and that might get old."
Metals:
Gold rose in Asia in a likely technical upward correction after front-month Comex gold for January delivery settled 1.5% lower overnight.
Mild USD weakness, which typically has an inverse correlation with the precious metal, was also likely supporting prices.
However, there are signs of liquidation of long gold positions by the top ten traders in Shanghai over the last few sessions, which seem to corroborate consolidation in gold markets, said TD Securities.
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Copper prices rebound after hitting a two-week low on Wednesday.
Although prices may fall in the short term on recent dollar strength and lower demand, copper is likely to remain strong in the long term, Guotai Junan Securities analysts said.
The USD could weaken as the Fed is likely to lower interest rates this year while lower inventories globally may support the copper prices, they added.
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Iron-ore prices advanced amid positive sentiment and low inventories.
Steel demand will likely rise in 1H amid expectations for more stimulus measures to support China's property sector and infrastructure projects, and lift the steel-making material's price, analysts at Galaxy Futures said.
Meanwhile, iron-ore inventories will likely remain tight in 1H amid a seasonal shipment off-season, they added.
TODAY'S TOP HEADLINES
Stocks' Bad Start to 2024 Has Forecasters On Edge
Stocks are off to a bumpy start in the early days of 2024. Proponents of the January Barometer are hoping for a turnaround because they believe the market's performance in the first month of the year sets the tone for the rest.
Major indexes have pulled back in the first two sessions after ending 2023 with a bang. The S&P 500 has fallen 1.4%, and the Dow Jones Industrial Average has declined 0.7%. The Nasdaq Composite has dropped 2.8%, its worst start to a year since 2005.
Fed Minutes Suggest Rate Hikes Are Over, but Offer No Timetable on Cuts
Federal Reserve officials thought they were done raising interest rates when they decided last month to hold them steady, but minutes of the meeting didn't reveal a meaningful debate about when to start lowering rates.
While nearly all officials anticipated policy rates would eventually be lowered before the end of this year, the written account of the Dec. 12-13 meeting, released Wednesday, underscored heightened uncertainty over how to navigate the next interval of monetary policy after the most rapid increase in interest rates in four decades.
Fed's Tom Barkin Says a Soft Landing Is 'in No Way Inevitable'
The latent effects of Federal Reserve rate hikes and companies boosting prices as inflation broadly cools could threaten a soft landing for the economy in 2024, a top Federal Reserve official said.
"After decades without pricing power, businesses, especially those facing margin pressure, won't want to back down from raising prices until their customers or competitors force their hands," Richmond Fed President Tom Barkin told an audience of businesspeople on Wednesday in Raleigh, N.C.
China Services Activity Rose to Five-Month High in December
A private gauge of activity in China's services sector rose to a five-month high in December, in contrast with an official index that remained in contraction.
The Caixin services purchasing managers index climbed to 52.9 in December from 51.5 in November, Caixin Media Co. and S&P Global said Thursday. A reading above the 50 mark suggests activity expansion, while a reading below that level indicates contraction.
Lithium Prices Ready to Rally Once More
SYDNEY-Lithium is one of Janus Henderson Investors' top commodity bets for 2024, despite the metal having a rocky run in recent months as investors fret that the energy transition is happening more slowly than thought.
Prices of lithium have fallen to around two-year lows as supply, including from Australia, outpaces demand for a metal that's a key component of electric-vehicle batteries and other technology such as smartphones. Electric-vehicle sales in the U.S. have plateaued in recent months, wrong-footing some automakers that had anticipated stronger demand.
The 'CEO' of Hamas Who Found the Money to Attack Israel
When Zaher Jabarin ran a Hamas cell in the 1980s, he borrowed cash from his mother to buy weapons. Now, he oversees a financial empire that the U.S. estimates is worth hundreds of millions of dollars and funds Hamas's operations against Israel.
The 55-year-old militant manages Hamas's financial relationship with its main benefactor Iran and handles how Tehran gets cash to the Gaza Strip, U.S. and Israeli officials say. He looks after a portfolio of companies that deliver income annually for Hamas and runs a network of private donors and businessmen who invest for the Islamist group.
U.S. Seeks Drone Bases in Coastal West Africa to Stem Islamist Advance
NAIROBI-The U.S. is seeking to base military drones along the West African coast in an urgent effort to stop the spread of al Qaeda and Islamic State in the region, according to American and African officials.
The U.S. is holding preliminary talks to allow American unarmed reconnaissance drones to use airfields in Ghana, Ivory Coast and Benin, countries on the Atlantic Ocean. Relatively stable and prosperous, the three coastal countries, along with Togo, now find themselves threatened by Islamist militants surging south from Mali, Burkina Faso and Niger-three beleaguered nations in the Sahel, the semidesert band south of the Sahara.
U.S., Allies Give Houthis Ultimatum: Stop Ship Attacks or Face Consequences
WASHINGTON-The U.S., Britain and key allies issued what officials described as a final warning to the Houthi Yemeni rebel group Wednesday to cease its attacks on international shipping in the Red Sea or bear the consequences.
"Ongoing Houthi attacks in the Red Sea are illegal, unacceptable, and profoundly destabilizing," says the statement issued by more than a dozen nations. "The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region's critical waterways."
Labor Board Backs Fired SpaceX Employees
An official for the U.S. labor-relations agency has accused SpaceX of violating a federal workplace law by firing employees who circulated a letter criticizing founder Elon Musk.
(MORE TO FOLLOW) Dow Jones Newswires
01-04-24 0015ET
