MARKET WRAPS
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Germany foreign trade; no major corporate trading updates expected
Opening Call:
Stock futures were mixed at the start of the week mirroring Asian stock benchmarks. The dollar and Treasury yields gained slightly; oil futures fell while gold advanced.
Equities:
Stock futures were mixed early Monday after U.S. markets shrugged off tough talk from Federal Reserve Chairman Jerome Powell about it being too early to talk about rate cuts on Friday.
Markets seem captivated by the prospect of future declines in U.S. inflation, Fed interest-rate cuts, and no recession.
Markets viewed Powell's comments as "inching toward the dovish camp," said Jeffrey Roach, chief economist at LPL Financial.
"A few weeks ago, Powell said policy is restrictive but today, he believes policy is 'well into restrictive territory.' I think it's fair for markets to latch on to that subtlety."
However, Scott Anderson, chief U.S. economist at BMO Capital Markets cautioned that these trades will get a real test Friday when the Labor Department releases the November employment report.
Forex:
The dollar edged higher early Monday.
"What we are witnessing in FX markets now really is an Antipodean show, with the USD and EUR both struggling as markets debate the timing of cuts," ANZ Bank said.
Coming up this week are key U.S. data such as ISM services and payrolls.
"The picture might change yet, and volatility might ramp up," the bank added.
Bonds:
Treasury yields gained slightly with traders focused mostly on Powell's description of current monetary policy as being "well into restrictive territory."
"Investors have been quick to move on to debate the timing of the first Fed cuts while the Fedspeak has pushed back, instead choosing to message that lowering policy rates won't be on the agenda for the foreseeable future," BMO Capital Markets strategists said.
Energy:
Oil futures declined early Monday.
The new OPEC+ agreement reached last week should offer oil markets temporary relief as seasonal swings in market balances ease pressure on member countries in 2H 2024, Daniel Ghali, senior commodity strategist at TD Securities, said.
In other developments, Brazil said it would join OPEC+ in January. That could be an important medium-term development if the South American producer eventually agrees to collective output management, Helima Croft, global head of commodity strategy at RBC Capital Markets, said.
Metals:
Gold climbed in Asia.
With bonds continuing to drive sentiment and yields falling, there seems to be little place else for gold to go except up, said Matt Simpson, market analyst at City Index and FOREX.com.
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Copper prices were lower after hitting the highest level in three months on Friday.
Overall market sentiment remains positive amid a weaker supply outlook in 2024 and a weaker USD, Guotai Junan Securities said.
Panama's plan to shut down First Quantum Minerals' Cobre operation may lead to overall tight supplies globally, they said adding that lower inventories of copper in China may also support prices.
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Iron ore edged higher amid tightly supply.
Iron-ore developers have scaled back investment plans in response to signs that steel demand in China is near its peak amid the property downturn, ANZ analysts said.
The tight supply will likely support iron ore prices in the foreseeable future, they added.
TODAY'S TOP HEADLINES
Goods Deflation Is Back. It Could Speed Inflation's Return to 2%.
After a historic run-up in inflation, Americans are now starting to see something they haven't in three years: deflation.
To be sure, deflation-that is, falling prices-is largely confined to appliances, furniture, used cars and other goods. Economywide deflation, when prices of most goods and services continuously fall, isn't in the cards.
How Rising Profits Could Prevent the Economy From Faltering
Profits have been making a comeback. That makes a comedown for the U.S. economy seem less likely.
The Commerce Department on Wednesday reported that before-tax corporate profits rose 1.1% from a year earlier in the third quarter. This compares with a decline of 6% in the second quarter. Moreover, that profit figure includes the income of Federal Reserve banks, which have lately been losing money owing to the combination of their big holdings of Treasury and mortgage securities and the sharp increase in rates. Exclude the Fed, and corporate profits rose by 6.7% in the third quarter compared with a gain of 1.6% in the second.
Stellar stock-market rally builds on 'soft landing' hopes. Why the economy isn't out of the woods.
A rally in the U.S. stock and bond markets in the past week defied the bears and fueled hopes for more gains to come by year-end and in 2024 as Wall Street bought into the idea that the economy will pull off a "soft landing" after a run of interest-rate hikes by the Federal Reserve.
But market skeptics are putting investors on alert that the "soft-landing" scenario is still at risk with consumer spending and job growth slowing, along with corporate earnings.
Jobs Data, Broadcom and Dollar General Earnings, and More to Watch This Week
The health of the U.S. labor market will be in focus this week, ahead of the Federal Reserve's December meeting. November payrolls data and the latest Job Openings and Labor Turnover Survey (JOLTS) will be the highlights. It will be a relatively calm week on the earnings calendar, with third-quarter earnings season in the rearview mirror.
Economist consensus calls for 175,000 new nonfarm payrolls in November, after a gain of 150,000 in October. The unemployment rate is forecast to hold steady at 3.9%. That data will come on Jobs Friday.
The Stocks Investors Are Putting Under the Tree
Retailers are making modest predictions about the holiday shopping season-and their stocks are going gangbusters in response.
Victoria's Secret, Foot Locker, Ulta Beauty and Dollar Tree are among the companies that offered somewhat mixed assessments of the state of the shopper last week. Yet each received an ovation from investors.
Hundreds of Stocks Have Fallen Below $1. They're Still Listed on Nasdaq.
Hundreds of stocks have broken the buck this year, following a slump in the once-hot market for buzzy startups seeking rapid growth.
As of Friday, 557 stocks listed on U.S. exchanges were trading below $1 a share, up from fewer than a dozen in early 2021, according to Dow Jones Market Data. The majority of these stocks-464 of them-are listed on the Nasdaq Stock Market, whose rules require companies to maintain a minimum share price of $1 or risk being delisted.
Israel-Hamas Deal Talks Stall as Fighting Ramps Up
Talks between Israel and Hamas to hand over hostages held in Gaza in return for a pause in fighting there have stalled, the White House said Sunday, while Israeli forces step up attacks and direct Palestinians in the enclave to move into a narrower strip of land.
"The negotiations have stopped. That said, what hasn't stopped is our own involvement, trying to get those back on track...We would like that to happen today," White House National Security Council spokesman John Kirby told NBC. He blamed Hamas for failing to provide a fresh list of civilian women and children to be released.
Israeli Peace Activists Face Reckoning After Hamas Attack
Weeks after Hamas attacked southern Israel, Sharone Lifschitz stood in the charred ruins of her parents' home in the Nir Oz kibbutz and listened to the bombs falling on the nearby Gaza Strip.
Five bullet holes scarred the door of the safe room where her mother and father-both longtime peace activists and founding members of the kibbutz-sheltered for hours until Hamas militants broke through on Oct. 7 and took them hostage. Her mother was released weeks later; her 83-year-old father is still being held in Gaza.
U.S. Destroyer, Commercial Vessels Attacked by Drones, Missiles in Red Sea
A U.S. destroyer and three commercial ships operating in the Red Sea came under drone and ballistic-missile attacks, the Pentagon said Sunday, marking the most significant escalation of a weekslong military attack on ships operating in those waters.
In two instances on Sunday, the USS Carney, an Arleigh Burke-class destroyer, came under attack, including while responding to distress calls from nearby commercial ships that faced missile attacks, the Pentagon said. The Carney also shot down a drone that flew nearby.
Fashion's New Look for Stores: Bigger, Better, Fewer
LONDON-Fashion retailers have found a way to make their shops dazzle customers again: make them more like Apple stores.
Brands including H&M and Zara have closed hundreds of stores in recent years to cut costs as more shoppers turn to e-commerce. Now they are investing in those that remain to woo customers in ways they can't online.
Brookfield-Led Consortium's $11 Billion Bid for Origin Energy Fails
SYDNEY-An US$11 billion bid for Origin Energy, one of Australia's largest power companies, was rejected by its shareholders on Monday in a stark illustration of how investors are adopting different strategies to bet on the energy transition.
Origin said that shareholders owning about 69% of its stock voted for the takeover, meaning that the bid made by a consortium led by Brookfield Asset Management fell short of the 75% approval threshold needed to secure a deal.
Alaska Air Reaches Deal to Buy Hawaiian Airlines
Alaska Air reached a roughly $1 billion deal to buy Hawaiian Airlines, a combination of two nearly century-old rivals that are dwarfed by the biggest players in a time of travel upheaval.
(MORE TO FOLLOW) Dow Jones Newswires
12-04-23 0014ET
