MARKET WRAPS
Watch For:
Manufacturing PMI data for Eurozone, U.K., Germany, France, Italy; Monetary developments in the euro area
Opening Call:
European stock futures traded higher ahead of the first trading session of 2024. Asian stock benchmarks were broadly lower; the dollar strengthened; oil futures and gold gained.
Equities:
European stock futures were higher despite a negative lead from most Asian stock markets as investors kick-off 2024 on Tuesday with full trading sessions.
Bulls will attempt to build on Wall Street's positive end-of-2023 momentum.
However, instead of providing a tailwind for the market, the "January effect" might work in reverse as investors scramble to lock in gains after the S&P 500 rose 24% in 2023, according to FactSet data.
"Any time you have a big burst like that, I think you're vulnerable to some profit-taking," said James St. Aubin, chief investment strategist at Sierra Investment Management.
"It wouldn't surprise anybody to see the market cool off a bit after a strong run."
Forex:
The U.S. dollar strengthened early Tuesday.
Swissquote analyst Ipek Ozkardeskaya said it wouldn't be a surprise to see the U.S. dollar recover against most majors in the first weeks of 2024.
Either European Central Bank officials talking of possible interest-rate cuts and/or the U.S. Federal Reserve retreating from rate-cut talk could see EUR/USD ease, she said.
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The yen weakened against other G-10 and Asian currencies amid mild risk appetite, which typically diminishes its safe-haven appeal.
There are rising hopes of rate cuts by global central banks and of lower inflation, said Michael Wan, senior currency analyst at MUFG Bank.
However, there are some risks around these expectations, Wan added, noting developments such as China's weaker-than-expected official manufacturing PMI released over the weekend.
Bonds:
Treasurys didn't trade in Asia due to a market holiday in Japan.
The path of least resistance for yields remains lower thanks to the Fed's dovish pivot, "and until economic data or Fed speak causes a reversal of that momentum, it's not a question of if yields will decline, it's a question of 'by how much,'" said Tom Essaye, founder of Sevens Report Research.
Energy:
Oil climbed amid geopolitical tensions that may disrupt supply.
Over the weekend, the U.S. Navy destroyed three boats carrying militants supported by Iran after they attacked a containership in the Red Sea.
Also, Tasnim, an Iranian semiofficial news agency close to the country's security establishment, said Monday that an Iranian destroyer has been moved to the Red Sea.
Marios Hadjikyriacos, senior investment analyst at XM, cautioned that "even though OPEC+ has taken repeated steps to rein in production and support prices, it is unlikely to pursue the same strategy for much longer, as it would forfeit more market share to U.S. producers who have dialed up their own production to record levels."
Metals:
Gold advanced early Tuesday and may remain supported by geopolitical tensions, analysts said.
Ongoing tension between Israel and Hamas will likely continue this year, which is poised to provide a cushion for gold prices, Axis Securities said.
Central banks will also likely accumulate gold at every dip, it added.
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Copper prices gained in Asia, supported by weaker production and overall positive market sentiment, Nanhua Futures analysts said.
However, copper plants reducing production needs for the winter season may pressure the base metal slightly, the analysts said.
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Iron-ore prices rose amid solid demand by steel mills.
Several cities in northern China have recently implemented emergency emission reduction measures for heavy pollution, which could weigh on iron-ore production, Huatai Futures analysts said.
However, steel mills' resilient consumption is ensuring demand for the steel-making material, they said, adding that the mills' winter replenishment needs and iron ore's low inventory will likely further prop up prices.
TODAY'S TOP HEADLINES
China's Private Factory Activity Expands for Second Month
A private gauge of China's factory activity expanded at a faster clip in December, contrasting with the official index, which fell deeper into contraction.
The China Caixin manufacturing purchasing managers index rose to 50.8 in December, up slightly from 50.7 in November, according to data released Tuesday by Caixin Media and S&P Global.
Optimism Abounds on Wall Street This New Year
Wall Street is feeling sunny about the stock market as the calendar flips to 2024.
Last year's widespread skepticism proved to be misplaced. Stocks rose through much of 2023, powered by the rise of artificial intelligence and an economy that stayed stronger than nearly all of Wall Street had anticipated. The recession that investors had largely agreed was imminent never came.
Outlook for Chinese Equities May Remain Challenging in 2024
China's equity markets were the worst performers in the Asia-Pacific region for 2023, and the new year is likely to bring more of the same, as recovery for the economy and corporate earnings remains challenging due to the lingering property downturn and local government debt risks.
Investors are struggling to find conviction that the worst is over for China's economy amid the country's on-and-off recovery momentum following the pandemic.
Chinese State-Owned Firms Establish $1.4 Billion Fund
Two Chinese state-owned companies will establish a 10 billion yuan ($1.41 billion) fund to invest in companies with real estate project assets.
Under the agreement, New China Life Insurance will be the limited partner providing CNY9.9 billion in capital and China International Capital Corp.will act as general partner that will manage the fund, New China Life said late Monday.
Shale Is Keeping the World Awash With Oil as Conflicts Abound
A surprise surge in American oil and gas production and exports is helping to keep the world stocked, blunting the impact of widening conflict in the Middle East that has crimped key shipping lanes.
When Iranian-backed Houthi militants began launching missiles and drones at ships crossing the Red Sea near Yemen in October, many feared disruption to the vital shipping lane would drive up energy prices. But oil and gas prices this past month have sunk about 5% and 23%, respectively.
Netherlands Blocks ASML Exports of Some Chip-Making Equipment to China
Netherlands has blocked chip-equipment manufacturer ASML's exports to China of some lithography systems, which are essential to making advanced microprocessors, in a partial license revocation following U.S. export restrictions.
The Netherlands-based company said Monday that the Dutch government recently partially revoked an export license for shipping the NXT:2050i and NXT:2100i lithography systems to China in 2023.
Evergrande Auto's Investment Agreement With Dubai Automaker Lapses
China Evergrande New Energy Vehicle said an agreement for a Dubai-based automaker to subscribe to its shares has expired, raising fresh doubts about a potential cash injection for the Chinese electric-vehicle manufacturer.
The parties to the share subscription and the loan conversion agreement by Nasdaq-listed carmaker NWTN haven't agreed to extend the long stop dates, which expired Dec. 31, 2023, Evergrande New Energy Vehicle, also known as Evergrande Auto, said in a filing late Monday.
Israel Reshuffles Forces, Prepares for Long-Term Conflict in Gaza
TEL AVIV-Israel began preparations for prolonged fighting in the Gaza Strip, reshuffling forces as it weighs how to sustain lower-intensity fighting over the long term.
Israel's top general said that it would take at least several more months to destroy Hamas's military capabilities in the enclave.
How IKEA Downsized to Go Downtown
PARIS-There was no instruction manual when IKEA's Paris team set to work building a new kind of city-center store.
The Swedish furniture company's ambition was to create a smaller version of its giant blue-and-yellow suburban stores for downtown consumers, to be replicated around the world. A quarter of the size of IKEA's traditional outlets, the central Paris store-the first of this new type when it opened in 2019-would need to be radically different, they decided.
Baidu Terminates $3.6B Deal to Buy JOYY's China Live-Streaming Business
Baidu has called off a $3.6 billion deal to buy JOYY's video-based entertainment live-streaming business in China.
As of the end of December, the closing conditions for the share purchase agreement had yet to be fully satisfied, Baidu said in a filing late Monday.
Big Tech Braces for Wave of Antitrust Rulings in 2024
U.S. antitrust cases against tech giants Google and Meta Platforms are expected to come to a head in 2024, likely producing long-awaited rulings that could shape the legacies of top Biden administration regulators.
Silicon Valley and its critics have seen their patience tested on some of these cases. A U.S. antitrust case brought against Alphabet's Google unit in 2020 went to trial in 2023 and now heads to closing arguments in May.
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Expected Major Events for Tuesday
00:01/UK: Dec Shop Price Index
01:01/IRL: Dec Ireland Manufacturing PMI
05:30/NED: Dec Producer confidence survey
06:00/NED: Dec Netherlands Manufacturing PMI
07:00/TUR: Dec Turkey Manufacturing PMI
08:00/CZE: 3Q LFSS Employment & Unemployment
08:00/POL: Dec Poland Manufacturing PMI
08:15/SPN: Dec Spain Manufacturing PMI
08:30/CZE: Dec Czech Republic Manufacturing PMI
08:45/ITA: Dec Italy Manufacturing PMI
08:50/FRA: Dec France Manufacturing PMI
08:55/GER: Dec Germany Manufacturing PMI
09:00/EU: Nov Monetary developments in the euro area (M3)
09:00/GRE: Dec Greece Manufacturing PMI
09:00/EU: Dec Eurozone Manufacturing PMI
09:30/UK: Dec S&P Global UK Manufacturing PMI
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01-02-24 0015ET
