EMEA Morning Briefing : Stock Futures Higher to Start Last Trading Week of Year

MARKET WRAPS

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No major economic data or trading updates expected

Opening Call:

Stock futures rose, pointing to gains at the start of a holiday-shortened week. Asian stock benchmarks tracked U.S. equities higher; the dollar and Treasury yields were steady; while oil futures fell and gold edged higher.

Equities:

European stock futures advanced early Wednesday as markets return from the Christmas break.

Asian equities tracked U.S. indexes higher, as the S&P 500 approached a record close Tuesday.

Investors are broadly optimistic heading into 2024. Interest-rate increases by the Federal Reserve have tamed inflation while avoiding a recession. Money managers expect the central bank will cut interest rates next year. Fresh data out Tuesday showed that shoppers kept spending during the holiday season.

"We're gonna finish December on a very positive note," said Louis Navellier, chief investment officer at Navellier & Associates. "There's a lot to look up to."

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The outlook for mining stocks for the next one to three months is positive, Jefferies said. "The prospect of Fed rate cuts, falling treasury yields and a weaker dollar are clear buy signals for mining equities."

Still, a rally could be shortlived if a recession follows, the bank said, "Either way, we see clear daylight for now," highlighting Anglo American, Alcoa and Teck as best-positioned for the near term.

Forex:

The Chinese yuan has lost more than 3% of its value against the greenback this year and was doing even worse before the dollar slipped against most global currencies in November.

The value of the yuan is also seen by many as a sign of confidence in China's economy, which is suffering from a moribund real-estate market, a slowdown in manufacturing and a reluctance by consumers to spend big. Foreign investors have pulled out of China's stock markets this year, and small investors in the country are nervous.

"The central bank's worry is that currency weakness will exacerbate negative sentiment among foreign investors and domestic ones," said Alvin Tan, head of Asia foreign-exchange strategy at RBC Capital Markets.

Bonds:

Treasury yields steadied early Wednesday. Market analysts expect a calm week, with only a couple of notable economic-data releases on the calendar.

"Optimism concerning Fed rate cuts and robust investor sentiment are fueling much of this appetite," said José Torres, senior economist at Interactive Brokers. "The longer end, however, remains a bigger wild card over time, with the path toward fiscal restraint remaining narrow."

Energy:

Oil futures edged lower early Wednesday after rising overnight. However, oil prices could remain at high levels due to geopolitical uncertainties and OPEC+ supply cuts.

The attack on a container ship in the Red Sea by Yemen's Iran-backed Houthi militia has escalated tensions in the Middle East, Xinhu Futures said. Meanwhile, OPEC+ members may further cut oil production, driving up oil prices, Xinhu added.

Metals:

Gold rose slightly in Asia, and will likely be supported by a weaker U.S. dollar and lower Treasury yields on expectations of interest-rate cuts by the U.S. Fed in early 2024, Tongguan Jinyuan Futures said.

U.S. holiday retail sales this year has slowed from last year, signaling consumption is weakening. Meanwhile, global geopolitical uncertainties boost market appetite for gold as a safe-haven asset, it added.

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Copper prices rose, supported by concerns over tight supply. Investors remain cautious about the supply outlook after Panama ordered First Quantum to shut down its flagship copper mine in the country.

However, prices are likely to ease in the new year, as current levels are too high and could lead to reduced demand, Nanhua Futures said.

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The benchmark spot iron ore price rose by 1.0%, supported by restocking demand from Chinese steel mills, according to S&P Global Commodity Insights.

The market-data company said ore with 62% iron shipped to north China cost $141.45/metric ton Tuesday, buoyed by demand from steelmakers that are expected to keep importing ore for their inventories heading into winter and ahead of the Lunar New Year holiday.

TODAY'S TOP HEADLINES

China's Industrial Profit Jumped in November

Profits earned by big industrial companies in China jumped in November, official data showed Wednesday, thanks to a low comparison base last year and Beijing's recent efforts to stimulate the economy.

Industrial profits rose 29.5% from a year earlier in November, compared with October's 2.7% expansion, marking the fourth month of year-over-year increase, said the National Bureau of Statistics.

How to Ride the Biotech Roller Coaster

With stocks starting to price in interest-rate cuts next year, the biotech sector has emerged as a winner for investors seeking riskier bets with more distant payoffs.

But investing in this industry is tricky because biotech is a sector of haves and have-nots. While every industry has its winners and losers, the gap in biotech is bigger due to the binary nature of drug development. Many companies spend years testing one medical approach or platform. In the end, either the idea works or it doesn't, and that could be the difference between tripling your investment or losing it all.

Nasdaq Set to Beat NYSE in IPO Race for Fifth Year in a Row

Nasdaq is on track to beat the New York Stock Exchange in the battle for initial public offerings in 2023, the fifth consecutive year in which the once-dominant NYSE has fallen behind its rival.

IPOs at Nasdaq have raised $13.6 billion compared with $10.4 billion for new listings at the NYSE, according to data provider Dealogic.

In Putin's Russia, Snitching Enforces a United Front-and an Outlet for Revenge

In June, Kamilla Murashova was fined 30,000 rubles, equivalent to about $330, after a stranger traveling on the same train reported her to police for the badges displayed on her everyday red backpack.

One emblem depicted the peace sign. Another said "No to War." A third pictured a blue sky and a yellow field of wheat-the colors of the Ukrainian flag.

AstraZeneca to Buy Gracell Biotechnologies for $1.2 Billion

AstraZeneca has agreed to buy Gracell Biotechnologies for a transaction value of $1.2 billion, as part of the former's efforts to grow its cell therapies business.

The upfront cash portion of the deal is $1.0 billion, a 62.0% premium to Gracell's last closing price for its American depository shares of $6.19, AstraZeneca said in a statement Tuesday.

Israeli War Cabinet Meets to Consider Egyptian Proposal to End War in Gaza

Israel's war cabinet met on Monday night to discuss a three-step plan put forward by Egypt for ending the war in Gaza, Israeli officials said.

The Egyptian proposal, a copy of which was reviewed by The Wall Street Journal, is the most comprehensive peace plan to be proposed to the two parties in the 11-week-old Gaza war.

Iran-Backed Forces Widen Their Attacks on Commercial Shipping

Escalating Iran-backed attacks against global commercial shipping in the Red Sea have heightened pressure on the Biden administration as officials scramble to protect trade while trying to avoid a direct confrontation with Tehran.

The U.S. Navy said late Saturday that two more vessels had been attacked that day by Iranian-backed Houthi forces in Yemen, bringing the number of commercial ships attacked near a crucial passageway between the Horn of Africa and the Middle East to 15. The Pentagon said earlier in the day that a chemical tanker in the Indian Ocean was struck by a drone launched directly from Iran, a claim Tehran denied.

Apple Appeals U.S. Ban That Halted Watch Sales

Apple is appealing a decision by a federal trade agency that forced it to stop selling two models of its smartwatches after the agency said Apple violated patents of a competitor.

Apple said in court documents filed Tuesday the company will suffer "irreparable harm" if the ban stays in place, since the models are its two most popular. The watch models affected are its newest ones: the Apple Watch Series 9 and the Apple Watch Ultra 2.

Israel Finance Minister Calls Intel's $25 Billion Investment 'Important and Significant'

Intel will invest $25 billion in Israel to expand its wafer fabrication site after receiving $3.2 billion from the country's government.

Intel will utilize the investment to expand its wafer site in Kiryat Gat. The Intel investment was announced by the Israeli government in June but remained unconfirmed until now. Israel said back in June that Intel reached an agreement in principle to invest $25 billion in a new manufacturing facility in the country, the largest ever foreign investment there.

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Expected Major Events for Wednesday

07:00/NOR: Nov Retail Sales

08:00/CZE: Dec Business cycle survey (consumer/business confidence)

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

12-27-23 0020ET