MARKET WRAPS
Watch For:
EU foreign trade; trading updates from Generali, Smiths Group, Kingfisher
Opening Call:
European stock futures declined, tracking Asian equities lower. The dollar edged higher; Treasury yields steadied; while oil and gold futures fell.
Equities:
Stocks look poised to fall at Tuesday's open, retreating from Monday's gains. Several senior Federal Reserve officials warned Monday that the U.S. central bank faces a slower path toward reaching its inflation target.
The U.S. economy is slowing down, albeit at a glacial pace, and this should help inflation continue to gradually cool, Atlanta Federal Reserve Bank President Raphael Bostic said. Cleveland Fed President Loretta Mester suggested she was thinking about backing away from her prior expectation that the Fed will cut interest rates three times this year.
Tim Duy, chief U.S. economist at SGH Macro Advisors, said Fed officials haven't lost confidence in the basic story that rate cuts will eventually be appropriate, even if it takes a bit longer than anticipated.
Rather than focus on the number of cuts this year, Bostic said the key question is when the Fed will be certain that inflation is clearly on a path to 2%.
Investors today will be watching for more Fedspeak and a speech by Bank of England Gov. Andrew Bailey.
Forex:
The DXY U.S. dollar index is likely confined for now between 104.2 and 104.9, the two levels marked by its 100- and 50-day moving averages, DBS said.
The DXY didn't return to last Friday's intraday high of 104.80 despite Fed comments on Monday signaling the Fed may lift its inflation forecast and pencil in fewer rate cuts, likely as Wednesday's FOMC minutes are awaited, DBS added.
Bonds:
Treasury bond yields ticked higher on Monday, rising for a third straight day as Fed officials warned that the central bank likely faces a slower path toward reaching its inflation target.
George Goncalves, head of macro strategy at MUFG, noted that the economic-data calendar is mostly devoid of major releases this week, which means stocks and bonds could see some consolidation of their gains from earlier in the month.
"We likely rallied a little too deep and too low in rates last week, and we've been scaling back. We're now around some important technical levels, with the 10-year around 4.45%," Goncalves said.
Energy:
Oil fell in Asia as traders assessed developments in Iran and Saudi Arabia. Following the death of Iran's president in a helicopter crash, political uncertainty in Iran is increasing amid a lack of clarity on a succession plan, said NAB. There's a similar story happening in Saudi Arabia, given the health problems of the country's king.
For now, however, markets don't appear too worried over the potential impact on oil products and exports, NAB said.
Metals:
Gold eased from highs early Tuesday. Futures had touched a new all-time high Monday as Chinese investors flocked to safe havens, rate-cut hopes grew and geopolitical tensions mounted.
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Copper prices rose amid signs that supply shortages could be deepening. The industry could face more challenges in developing new mines, especially after two major mines were shut late last year due to escalating costs and restrictive government policies, ANZ said.
Meanwhile, the rally in copper prices has been supercharged by improved inventor sentiment in recent weeks, sending the red metal above $10,000 a ton, ANZ noted. Even signs of subdued demand in China have failed to dampen investor sentiment, it added.
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Iron ore futures retreated slightly in Asian trading. Prices had been rising after China announced a major property policy change on Friday, ANZ said. However, newly released data suggest challenges ahead, ANZ said, noting that Chinese local governments' land disposal revenue fell 21% on year to an eight-year low in April.
TODAY'S TOP HEADLINES
Wall Street strategists rush to revise their S&P 500 targets as stocks hit fresh records. Here's what they see happening.
The stock market's renewed record-setting rally has blindsided Wall Street's top strategists, prompting many to swiftly revise their year-end S&P 500 targets in an effort to keep pace with a surge that has far exceeded expectations from earlier this year.
At least 11 Wall Street firms have lifted their year-end forecasts for the S&P 500 SPX so far in 2024. In the past week alone, BMO Capital Markets and Deutsche Bank revamped their 2024 targets for the large-cap benchmark index, raising them to 5,600 and 5,500, respectively.
Ship Freight Rates Soar as Red Sea Diversions Become a Norm
Ship diversions from the Red Sea helped push up container freight rates by roughly 30% in the past couple of weeks, with costs for importers set to rise further as they boost their volumes ahead of the busy summer season.
Ship owners and brokers say nine out of 10 large container ships are diverting from the Red Sea, the entry point to the Suez Canal on their way from Asia to Europe, after a spate of attacks by Iran-backed Houthi rebels since November.
Rio Tinto Invokes Force Majeure on Australian Alumina Sales
Rio Tinto said Tuesday that it has declared force majeure on alumina shipments from operations in Australia's Queensland state because of a gas shortage.
Gas supplies to Rio Tinto's alumina refineries in Gladstone have been constrained since March due to a breakage of the Queensland Gas Pipeline. The company has provided notice of the force majeure affecting third-party contracts, a spokesperson said in an emailed statement. Force majeure is a legal declaration that excuses a company from fulfilling contractual obligations because of circumstances outside its control.
BMW, Jaguar and VW Parts May Have Been Made With Forced Labor, Senate Report Says
BMW, Jaguar Land Rover and Volkswagen sourced parts from a company on a ban list over alleged links to Chinese forced labor, a leading U.S. Senate Democrat said in a report that calls for stepped up enforcement efforts.
All three automakers had in their supply chains parts made by a company under an explicit import ban over forced labor concerns, Sen. Ron Wyden, chair of the Senate Finance Committee, said Monday in a report that follows a monthslong investigation.
Palestinians Struggle for Food and Water After Fleeing Rafah
When Ahmad Shweikh and his family moved into a tent near the Mediterranean Sea this month, the young father immediately started searching for water and toilets. The nearest toilet was some 500 yards away, with a wait time of half an hour. So Shweikh dug a hole in front of their tent for his family to use instead.
Water flowed from a nearby pipe in the ground once every few days. When it did, Shweikh would rush over with other families. He considered himself lucky if he could fill a bucket that he could then ration for drinking, cooking and cleaning.
After Raisi's Death, Iran Wrestles With Two Succession Challenges
Iranian President Ebrahim Raisi's death has dealt an unsettling blow to the country's politics and raises questions regarding the succession of not just the presidency, but also the most powerful position in the country-that of supreme leader.
Raisi, who died in a helicopter crash over the weekend along with Iran's foreign minister, was widely seen as a potential successor to the current top figure, Ayatollah Ali Khamenei, who is 85 and has a history of illness. There is no publicly anointed heir-apparent.
Zoom bumps its longer-term outlook higher, but near-term forecast comes up short
Zoom Video Communications Inc. on Monday bumped its full-year profit and sales forecast higher, after reporting first-quarter results that beat Wall Street's expectations, helped by a broader artificial-intelligence rollout across the video-calling platform's products.
But while Zoom's longer-term forecast was more upbeat, its nearer-term expectations for the second quarter were a bit below analysts' forecasts.
Jamie Dimon Says His Retirement Is Getting Closer. Finally.
Jamie Dimon acknowledged that he will likely be leaving his role as chief executive officer of JPMorgan Chase in fewer than five years.
For at least the past decade, Dimon has answered questions about potentially retiring with the same boilerplate response: five more years. On Monday, the 68-year-old admitted that the clock is finally starting to tick.
Tesla Shareholder Group Calls for Vote Against Musk Pay Package
A group of Tesla shareholders is calling for investors to vote against Elon Musk's $46 billion pay package, which has become a flashpoint for the electric-vehicle maker as it faces slowing vehicle sales and tumbling shares.
The group, which includes New York City Comptroller Brad Lander, wrote to other Tesla holders Monday urging them to reject Musk's pay package and the re-election of two company board members, arguing that the board was too close to Musk and had failed to properly evaluate the compensation package.
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Expected Major Events for Tuesday
06:00/SWE: 1Q Industrial capacity utilization
06:00/NOR: 1Q Labour Cost Index - preliminary figures
06:00/DEN: 1Q Preliminary GDP
07:00/GER: Apr PPI
07:00/SPN: Mar Industrial Orders & Turnover
08:00/BUL: 1Q Labour force survey
08:00/EU: Mar Euro area balance of payments
09:00/EU: Mar Foreign trade
09:00/EU: Mar Construction output
09:00/LUX: Apr Unemployment
09:00/ITA: Mar Balance of Payments
10:00/UK: May CBI Industrial Trends Survey
12:00/HUN: May Hungarian interest rate decision
15:59/GRE: Mar Balance of Payments
22:00/NED: Apr House Price Index
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05-21-24 0017ET
