MARKET WRAPS
Watch For:
UK Nationwide House Price Index
Opening Call:
European stock futures traded little changed ahead of the final
trading session of 2023. Asian stock benchmarks were mixed; the
dollar and Treasury yields were steady; oil futures edged higher
and gold fell.
Equities:
Stock futures were little changed early Friday ahead of likely
quiet trade on the last trading day of the year.
European equities should perform well in 2024, outperforming
their U.S. counterparts, helped by lower relative valuations and
earnings expectations, Pictet Asset Management said in its annual
asset-allocation outlook.
"The U.S.'s stellar status in global stock markets will dim,
while European equities will surprise in a good way."
European earnings expectations are "much more muted" than those
in the U.S., leaving less room for disappointment, while caution
toward eurozone equities should reverse as the economy recovers,
Pictet said.
The asset manager calculated Europe trades on a 12-month forward
price-to-earnings ratio of 12 times, compared to the U.S. at 19
times, a difference it described as "unprecedented."
Forex:
Dollar selling could continue during the last remaining trading
hours of 2023 and is likely to hit its nadir sometime in January
before the currency picks up again, said Jefferies global head of
FX Brad Bechtel.
"I expect we will bottom in January, similar to last time, just
as everyone convinces themselves they need to be dollar bears," he
said.
Meanwhile, the European Central Bank's recent rhetoric
suggesting interest rates are likely to stay high as inflation
remains a problem contrast with hints of rate cuts from the Fed and
support the euro, he said.
"Although I think the ECB capitulates, it's hard to get too
short EUR/USD until they do."
Bonds:
Treasury yields steadied after moving higher overnight. Yields
remain lower on the week, however, and have declined sharply since
the 10-year topped 5% in October, a decline accelerated by
expectations for the Federal Reserve to begin cutting interest
rates in 2024.
The path of least resistance for yields remains lower thanks to
the Fed's dovish pivot, "and until economic data or Fed speak
causes a reversal of that momentum, it's not a question of if
yields will decline, it's a question of 'by how much,'" said Tom
Essaye, founder of Sevens Report Research.
Energy:
Oil futures rose Friday after falling overnight as several
shipping companies have said they are ready to resume transit in
the Red Sea. Oil will likely remain volatile in the short term due
to geopolitical uncertainty in the Middle East, Guotai Junan
said.
Meanwhile, U.S. Treasury yields could continue to fluctuate
before further signals from the Fed on rate cuts, weighing on oil
prices. Focus is on the implementation of production cuts by OPEC+
members in the next week, Guotai Junan added.
Metals:
Gold advanced in Asian trade after data showing the U.S. labor
market continues to cool. With the U.S. labor market cooling and
inflation gradually coming under control, markets see rate cuts
from the Fed earlier than previously expected and by a greater
magnitude, Guangfa Futures said.
Recently weaker U.S. Treasury yields and a softer dollar index
are also propping up demand for gold. Amid weaker liquidity at
year-end, gold prices may continue to fluctuate, Guangfa added.
-
An accelerating turnaround in China's grid spending is positive
for metals, said Citi, which expects grid investment growth there
for 2023 will be the strongest since 2016. Copper and aluminum are
the biggest beneficiaries of the pickup in grid investment, Citi
said.
Citi noted implied grid spending in China was up 5.9% in the
first 11 months of the year, following a 1.2% rise in 2022. The
year prior marked the beginning of the turnaround, after falls in
investment between 2015-2020.
"Decarbonization demand (of which grid is a component) is going
to drive almost all of the demand for copper in the medium term, in
our view, and should be supportive for a tight copper market," Citi
said.
TODAY'S TOP HEADLINES
What Did Wall Street Get Right About Markets This Year? Not
Much.
Almost no one thought 2023 would be a blockbuster year for
stocks. They could hardly have been more wrong.
The Federal Reserve raised interest rates at the fastest clip
since the 1980s, a regional banking crisis felled Silicon Valley
Bank, and war broke out in the Middle East. Yet stocks kept
climbing.
Biden Struggles to Push Trade Deals With Allies as Election
Approaches
WASHINGTON-The Biden administration on Thursday extended for two
years a temporary measure to suspend Trump-era tariffs on European
steel and aluminum, the latest sign that the president is finding
it difficult to resolve trade frictions as an election year
approaches.
Washington and Brussels have failed to find a permanent solution
to eliminate the levies more than two years after the negotiations
began. With the announcement, the administration will keep in place
a temporary import quota system that replaced Trump-era tariffs
while talks continue. The EU has criticized the temporary fix,
which could be undone if Biden isn't re-elected.
Santa Might Have One Last Gift for Investors
It looks as though Santa hasn't left town just yet.
The S&P 500 is poised to cap a roaring comeback this year
with a Santa Claus rally, or the gain that stocks often get heading
into the new year. That would mark the eighth straight year stocks
got a Santa bump, which hasn't happened since the eight-year
winning streak ending in 1976, according to Dow Jones Market
Data.
Small Drones Are Helping Israel Navigate the Urban Battlefield
in Gaza
The Israeli military has tried a variety of methods to explore
Hamas's tunnels in Gaza: robots, robot dogs and real dogs. But what
it has quickly learned is that the cheapest and most effective
option for exploring the underground labyrinths-which are a
potential death trap for soldiers-is a small quadcopter drone.
It isn't just tunnels. In the dense urban battlefield of Gaza,
the Israeli military has been flying these quadcopters-essentially
small helicopters with four rotors-into buildings before sending in
soldiers. The devices are also providing smaller units with aerial
reconnaissance and being used as guided munitions.
The New Star on the Political Scene: The Chip Industry
Semiconductors have played the starring role in state visits.
Nvidia's chief executive was feted by heads of state like a
visiting dignitary. Government delegations have shuttled around the
globe hobnobbing with chip makers.
For an industry that suddenly finds itself as a geopolitical
showpiece, the attention is a mixed bag.
Write to singaporeeditors@dowjones.com
Expected Major Events for Friday
05:30/NED: Nov PPI
05:30/NED: Nov Retail turnover
07:00/UK: Dec Nationwide House Price Index
07:00/TUR: Nov Foreign Trade
07:45/FRA: Nov Housing starts
08:00/SVK: Dec Business tendency survey
08:00/SVK: Dec Economic sentiment indicator
08:00/SWI: Dec KOF economic barometer
09:00/BUL: Nov PPI
09:30/UK: Nov Capital issuance statistics
10:00/CRO: Nov Industrial Production Volume Index
10:00/GRE: Nov PPI
10:00/SPN: Dec Flash Estimate CPI
10:00/CRO: Nov Retail trade
10:00/CYP: Nov PPI
10:00/GRE: Oct Turnover Index in Retail Trade
10:00/BEL: 3Q Balance of Payments
11:00/POR: Nov Retail trade
13:00/POL: 3Q Quarterly Balance of Payments
15:59/UKR: Nov Industrial Production
16:59/SPN: Oct Monthly Balance of Payments
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(END) Dow Jones Newswires
December 29, 2023 00:19 ET (05:19 GMT)
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