MARKET WRAPS
Stocks:
European stocks climbed on Thursday, building on Wednesday's gains, after a cease-fire deal between Israel and Hamas and a number of earnings updates fueled investor optimism.
Luxury stocks were among the top gainers after a better-than-expected sales update from Cartier owner Richemont that eased investor worries about the industry's outlook.
Semiconductor stocks in Asia and Europe were also on the rise after TSMC guided for robust sales growth this year on strong artificial-intelligence demand.
Meanwhile, the U.K. economy returned to growth in November, but that is unlikely to mark the start of a recovery that will be strong enough to ease concerns about the government's ability to tame its rising debts.
U.S. Markets:
Stock futures ticked higher ahead of more bank earnings; Bank of America and Morgan Stanley are due to report, as are numerous smaller banks.
Also on the schedule are retail-sales data for December. Economists expect month-on-month growth to slow from November.
Forex:
The euro struggled to recover materially as concerns about a weaker eurozone economic outlook and political headwinds weighed, ING said.
The U.S. core inflation data on Wednesday offered a good opportunity for the euro to rally as two-year rate spreads narrowed but gains were modest.
This perhaps "represents a conviction view that the eurozone and the euro will underperform this year on weak growth and weak leadership in the region."
The outlook for sterling remains negative after the weaker-than-expected economic growth data, Swissquote Bank said.
The data keep pressure on sterling after recent falls on fiscal concerns following a sharp selloff in U.K. government bonds which took yields higher, it said.
Lower-than-expected U.K. inflation data Wednesday gave some brief respite to gilts and sterling, Swissquote added.
The dollar traded flat as it recovered some ground after falling on Wednesday's core inflation data.
Investors remain prudent about aggressively selling the dollar even though markets have brought forward expectations for the next Federal Reserve interest-rate cut, Unicredit Research said.
"Indeed, the DXY dollar index remains slightly above 109, while the euro failed to extend its rebound above $1.03."
Treasury Secretary nominee Scott Bessent is likely to maintain the strong dollar theme at his confirmation hearing later, ING said.
If tariffs are highlighted as a key tool in balancing government finances at Thursday's hearing, the dollar could rise, ING added.
Bonds:
The turnaround of gilts on Wednesday was "particularly impressive", with the 10-year gilt yields sliding 16 basis points by the time markets closed, Citi Research said.
This came after below-forecast U.K. inflation data increased prospects of the Bank of England cutting rates and marked the biggest fall in yields since late 2023, Citi said.
However, inflation risks haven't gone away. Wage growth data--due Tuesday--is arguably more important than CPI data for gauging the interest-rate outlook, they say.
With U.K. inflation likely heading higher during the year, softer wage growth is essential to allow the Bank of England to lower rates.
"Still, peak pessimism for gilts may have passed, for now."
Even if the market is becoming more sceptical of U.S. government debt, an unbridled selloff of Treasurys is unlikely, DZ Bank Research said.
"The simple fact is that there is no real alternative to the U.S. bond market for international investors."
However, market participants will demand compensation for the increased credit risk, it said.
DZ Bank expects the 10-year Treasury yield to decline to 4.40% on a three-month horizon, before rising to 4.65% in six months' time and to 5% in 12 months' time.
Energy:
Oil prices edged lower, but remained supported by concerns over the effect of U.S. sanctions on Russian flows and a larger-than-expected drawdown in U.S. stockpiles.
"The market shrugged off a cease-fire agreement between Israel and Hamas, " ANZ Research said.
"The conflict has ultimately had little impact on the physical market, although the deal does suggest a wider conflict in the region involving oil producer Iran is less likely."
MUFG said oil prices are unlikely to hold on to current levels due to Russia's aggressive crude discounting, OPEC+'s spare capacity and a projected global surplus this year.
Russia has a strong track record of aggressively discounting its oil to attract price-sensitive customers, while OPEC+ sit on around 6 million barrels a day of spare capacity that could withstand any supply tightening threat.
Plus, global oil markets are still expected to swing into a supply surplus as non-OPEC+ production returns to growth.
"We have not changed our base case for oil prices with Brent in the $65-$80/b range, averaging $73/b in 2025," MUFG said.
"Although, these new sanctions skew price risks to the upside in the near-term."
Metals:
Gold futures rose, and the precious metal's strong start to the year is set to climb much further in the short-term, given the incoming administration of Donald Trump, MUFG said.
Trump's administration coming into power will drive up safe-haven demand and play into the fear-related dimension of MUFG's bullish expectations for gold in 2025.
Commodities act as a critical inflation hedge, and MUFG expects a number of Trump-policy-induced inflation shocks.
Alongside gold's position as a first resort for a hedge against geopolitical instability, emerging market central banks continue to purchase bullion, MUFG added.
Comex gold futures' bullish momentum is reaccelerating, RHB Retail Research said.
The futures' latest long bullish candlestick reflects gold bulls returning to the "driver's seat."
EMEA HEADLINES
TotalEnergies Expects Fourth Quarter Production Increase, Weak Refining Margins
TotalEnergies expects hydrocarbon production in the fourth quarter to increase slightly, but refining margins to remain weak despite increasing on-quarter.
The French oil and gas company said Thursday that fourth-quarter production is expected to have increased in-line with its guided range. It expects to report production between 2.4 million and 2.45 million oil-equivalent barrels a day, but that the $5 a barrel decrease in oil prices will have dragged on financial performance. Hydrocarbon production in the third quarter was 2.4 million oil-equivalent barrels a day.
Stellantis Car Deliveries Weighed by U.S. Inventory Cuts
Stellantis vehicle deliveries fell 9% in the fourth quarter of 2024 as the Jeep and Ram-maker took action to reduce excess inventory in the U.S.
The auto giant, which also houses brands including Chrysler, Fiat and Peugeot, said that vehicle deliveries in North America fell 28% in the quarter. Some 115,000 fewer cars were shipped to North American customers than in the same quarter a year earlier as the company worked to reduce bloated inventories in the U.S.
How Months of Geopolitical Upheaval Paved Way for Gaza Cease-Fire
The broad terms of the cease-fire deal that Israel and Hamas agreed to Wednesday after a year of fruitless negotiations aren't substantially different from those that were available to both sides eight months ago. What changed is everything else.
Israeli Prime Minister Benjamin Netanyahu spent the first half of last year fighting with political rivals and trying to keep his governing coalition together. He was stuck in a war of attrition with Hamas in Gaza and facing ominous threats from Iran and its allied militia in Lebanon, Hezbollah.
GLOBAL NEWS
Treasury Secretary Pick Scott Bessent Says Trump Could Bring 'New Economic Golden Age'
WASHINGTON-Tariffs, tax policy and budget deficits look likely to dominate Thursday's confirmation hearing for Scott Bessent, the fund manager picked by President-elect Donald Trump to run the Treasury Department.
Bessent, who has spent his career in the private sector, will get a chance to air his views in public, potentially giving clearer guidance about the incoming administration's economic priorities. Trump has "a generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans," Bessent is expected to say, according to his prepared remarks.
Bank of Japan Chief Again Signals Chance of Rate Hike Next Week
TOKYO-Bank of Japan Gov. Kazuo Ueda repeated his pledge to discuss an interest-rate increase next week, echoing recent comments that have revived market expectations for imminent policy action.
"If improvements in the economy and prices continue this year, we will adjust the degree of monetary easing by raising interest rates," Ueda said at a gathering of regional bank executives on Thursday.
It's Trump vs. the Budget Hawks. How the GOP Spending Fight Could Spread to Wall Street.
President-elect Donald Trump will take the oath of office on Jan. 20 against a troubling fiscal backdrop. Since his first inauguration eight years ago, federal debt held by the public has doubled from $14.4 trillion to $28.8 trillion, just a hair under 2024's gross domestic product. The federal deficit, which totaled 3.5% of GDP in the fiscal year ended on Sept. 30, 2017, grew to 6.4% in fiscal 2024.
Interest on the debt has also grown as the Federal Reserve has raised interest rates to fight inflation. Interest payments cost the federal government-and by extension, all U.S. taxpayers-$882 billion in 2024. They are expected to cross the $1 trillion mark this year.
Biden Warns of Oligarchy and Tech Industrial Complex in Farewell Address
WASHINGTON-President Biden said Wednesday that an oligarchy and a tech industrial complex were taking hold in America, warning of the risks of unchecked power in a farewell address that served as a bittersweet coda to his 50-year political career.
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01-16-25 0535ET
