MARKET WRAPS
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No major economic events expected; trading updates from Philips, Ryanair Holdings, Galp Energia
Opening Call:
Shares are poised to open lower in Europe on Monday ahead of a busy week of central bank decisions and corporate earnings. In Asia, stock benchmarks were higher; Treasury yields declined; the dollar consolidated; while oil and gold advanced.
Equities:
European stocks are headed lower early Monday as investors focus on rate decisions by the Federal Reserve and the Bank of England along with corporate earnings.
The FOMC will announce its monetary policy decision on Wednesday where it's all but certain that no interest-rate actions will be taken.
Crucial data on the state of the labor market are also on tap, and the Treasury will outline its borrowing plans, which has big implications beyond the bond market.
The corporate earnings reporting season reaches a crescendo, with technology megacap companies--Apple, Amazon.com, Microsoft, and Alphabet reporting results.
"The equity market reaction has been positive to better-than-expected macro data," Citigroup strategist Scott Chronert said.
"Therefore, bad economic news may not be good equity market news like it was for most of the back half of 2023."
Forex:
The dollar consolidated in Asia and ANZ Bank thinks price action will likely stay muted ahead of this week's Fed decision and U.S. non-farm payrolls data.
"If there's anything hawkish (or even less dovish) in the Fed statement, we could see the USD pop higher, especially with U.S. markets 50/50 on a March Fed cut, which seems a bit too soon," ANZ said.
Danske Bank Research said its forecasts for rate cuts by the Fed in March and by the ECB in June are positive for EUR/USD in the first half of 2024.
Danske Research maintains its bias toward selling EUR/USD on rallies in the near-term, and forecasts EUR/USD at 1.07 on a six-month horizon and 1.05 in 12 months.
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Euro is expected to rise against the sterling as the Bank of England is seen moving away from a tightening bias at the Feb. 1 meeting, Danske Bank Research said.
"We expect the BOE monetary policy committee to deliver a dovish tilt to its guidance coupled with a downward revision to its inflation forecast, " it said.
The BOE is likely to prepare markets for an upcoming interest-rate cut during the May meeting and deliver the first cut in June, Danske Bank said and forecasts EUR/GBP towards 0.89.
Bonds:
U.S. government debt yields were lower after finishing mostly higher on Friday after December inflation data reinforced the possibility of a soft landing for the economy.
"For a market that was looking for a 'high' +0.1%, the realized figures were very much in line," said BMO Capital Markets strategist Ben Jeffery, referring to Friday's PCE report for December.
"We don't expect December's data will materially shift March cut odds ahead of the weekend, and instead we'll look for next week's supply announcements, FOMC [Federal Open Market Committee] decision, and payrolls print to quickly take the market's focus as the PCE print is digested," he said.
Investors are focusing on the Treasury's outline of its borrowing needs later today and the breakdown in its bill, note, and bond offerings on Wednesday.
Energy:
Oil futures gained early Monday amid supply concerns spurred by geopolitical tensions in the Middle East.
Strategists at Macquarie said they remain "structurally bearish on crude but tactically neutral to slightly bullish until Middle East tensions either equilibrate or abate."
"Barring an escalation, we anticipate price will stay in its current range for 1Q24 as no supply loss is expected," they said.
Metals:
Gold moved higher in Asia likely helped by safe-haven demand spurred by rising geopolitical tensions.
Over the weekend, three U.S. service members were killed and more than 30 were injured in an Iran-backed militia's drone strike on a base in northeast Jordan, according to U.S. officials, the WSJ reported.
This marks the first time American troops have been killed in hostile action since the start of the Hamas-Israeli conflict in Gaza.
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Iron-ore prices were higher in Asia following Beijing's recent move to give more financial support to struggling property developers.
The PBOC last week said developers can use bank loans against commercial properties to repay other loans and bonds until end-2024.
However, the market still faces high iron-ore inventories, with stockpiles at major Chinese steel mills up 6.7% to 15.4 million tons in mid-January from the start of the month, analysts said, citing data from China Iron and Steel Association.
TODAY'S TOP HEADLINES
Stocks Poised for Lower Open
Stocks are poised to open lower in New York on Monday, ahead of the Federal Reserve's monetary policy decision on Wednesday, the jobs report for January, and a busy week of corporate earnings reports highlighted by big tech companies.
At 6:16 p.m. ET on Sunday, Dow Jones Industrial Average futures lost 85 points, or 0.2%; the S&P 500 futures lost 0.2%; and Nasdaq Composite futures fell 0.3%.
Plummeting Inflation Raises New Risk for Fed: Rising Real Interest Rates
Federal Reserve officials start the year with a problem they would ordinarily love to have: Inflation has fallen much faster than expected.
It does, nonetheless, pose a conundrum. The reason: If inflation has sustainably returned to the Fed's 2% target, then real rates-nominal rates adjusted for inflation-have risen and might be restricting economic activity too much. This means the Fed needs to cut interest rates. The question is, when and by how much?
Brutal Winter Across America Is Keeping the Housing Market on Ice
The housing market can't seem to catch a break.
While the average 30-year fixed-rate mortgage continues to inch away from last year's peak, storms and dangerous cold weather around the U.S. this winter season seem to be keeping some would-be buyers and sellers sidelined, according to Redfin.
Banker Bonuses Are Down Again-but It Stings This Time
This bonus season is shaping up to be another underwhelming one for bankers on Wall Street as lackluster deal activity pushes down the closely watched annual payouts.
The bonuses that some bankers are getting are flat or down from what they received a year earlier, bank employees and recruiters said. Investment-banking bonuses have fallen as much as 25% so far, according to Johnson Associates, a Wall Street compensation consultant. And those payments are down from what already qualified as an underwhelming bonus season a year ago.
Swiss Building-Materials Giant Plans Separation of U.S. Business
Switzerland's Holcim struck a deal to separate out its North America business, a big supplier of building materials that could be worth more than $30 billion.
The plans were unveiled Sunday, confirming an earlier report by The Wall Street Journal.
For the Osage, This Century's Fight Is Over Wind Turbines
In Martin Scorsese's "Killers of the Flower Moon," which was nominated for 10 Academy Awards, members of the Osage Nation in Oklahoma faced a murderous conspiracy to steal their wealth.
A century after those crimes, tribe members say their ownership rights were again disregarded.
U.N. Says Gaza Aid Is at Risk as Nations Pause Relief-Agency Funding
The United Nations agency for Palestinian refugees said it could be forced to suspend its operations if donor states don't reinstate funding that several countries paused amid allegations from Israeli authorities that a dozen of the agency's staff participated in the Oct. 7 attacks on Israel.
Philippe Lazzarini, secretary-general of the U.N. Relief and Works Agency, said the decisions by at least nine countries, including the U.S., to suspend funding to the agency threaten the humanitarian work of the largest assistance organization in the Gaza Strip.
Israel Struggles to Destroy Hamas's Gaza Tunnel Network
As much as 80% of Hamas's vast warren of tunnels under Gaza remains intact after weeks of Israeli efforts to destroy them, U.S. and Israeli officials said, hampering Israel's central war aims.
Thwarting Hamas's ability to use tunnels is the keystone to Israel's effort to capture top Hamas leaders and rescue the remaining Israeli hostages, Israeli officials have said. And Israel has said it has conducted strikes on hospitals and other key infrastructure in its pursuit of the tunnels.
Evergrande Was Once China's Biggest Property Developer. Now, It Has Been Ordered to Liquidate
Property developer China Evergrande Group has been ordered to liquidate by a Hong Kong court, bringing an end to the yearslong saga of a company whose default rippled through the world's second-largest economy.
The liquidation order came despite an 11th-hour push by the company's creditors to reach a deal over the weekend, according to people familiar with the matter. It comes more than two years after the company defaulted on its dollar bonds, becoming one of the first dominoes to fall in China's beleaguered real-estate sector.
Portable-Building Companies Near $3 Billion Merger
Willscot Mobile Mini Holdings is nearing a $3 billion-plus deal to acquire McGrath RentCorp in a bet on the growing appetite for portable buildings and storage containers.
The cash-and-stock deal is expected to be unveiled Monday, assuming it doesn't hit any last-minute snags, according to people familiar with the matter. The per-share price to be paid couldn't be learned.
WuXi AppTec Shares Continue Slide After Company Calls U.S. Draft Bill Findings Inaccurate
WuXi AppTec shares continued declining after the Chinese company said that alleged findings by a U.S. draft bill against it were neither legitimate nor accurate and that its business wouldn't pose security risks for any country.
(MORE TO FOLLOW) Dow Jones Newswires
01-29-24 0015ET
