MARKET WRAPS
Watch For:
Manufacturing PMI data for Eurozone, U.K., Germany, France,
Italy; Monetary developments in the euro area
Opening Call:
European stock futures traded higher ahead of the first trading
session of 2024. Asian stock benchmarks were broadly lower; the
dollar strengthened; oil futures and gold gained.
Equities:
European stock futures were higher despite a negative lead from
most Asian stock markets as investors kick-off 2024 on Tuesday with
full trading sessions.
Bulls will attempt to build on Wall Street's positive
end-of-2023 momentum.
However, instead of providing a tailwind for the market, the
"January effect" might work in reverse as investors scramble to
lock in gains after the S&P 500 rose 24% in 2023, according to
FactSet data.
"Any time you have a big burst like that, I think you're
vulnerable to some profit-taking," said James St. Aubin, chief
investment strategist at Sierra Investment Management.
"It wouldn't surprise anybody to see the market cool off a bit
after a strong run."
Forex:
The U.S. dollar strengthened early Tuesday.
Swissquote analyst Ipek Ozkardeskaya said it wouldn't be a
surprise to see the U.S. dollar recover against most majors in the
first weeks of 2024.
Either European Central Bank officials talking of possible
interest-rate cuts and/or the U.S. Federal Reserve retreating from
rate-cut talk could see EUR/USD ease, she said.
--
The yen weakened against other G-10 and Asian currencies amid
mild risk appetite, which typically diminishes its safe-haven
appeal.
There are rising hopes of rate cuts by global central banks and
of lower inflation, said Michael Wan, senior currency analyst at
MUFG Bank.
However, there are some risks around these expectations, Wan
added, noting developments such as China's weaker-than-expected
official manufacturing PMI released over the weekend.
Bonds:
Treasurys didn't trade in Asia due to a market holiday in
Japan.
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 climbed amid geopolitical tensions that may disrupt
supply.
Over the weekend, the U.S. Navy destroyed three boats carrying
militants supported by Iran after they attacked a containership in
the Red Sea.
Also, Tasnim, an Iranian semiofficial news agency close to the
country's security establishment, said Monday that an Iranian
destroyer has been moved to the Red Sea.
Marios Hadjikyriacos, senior investment analyst at XM, cautioned
that "even though OPEC+ has taken repeated steps to rein in
production and support prices, it is unlikely to pursue the same
strategy for much longer, as it would forfeit more market share to
U.S. producers who have dialed up their own production to record
levels."
Metals:
Gold advanced early Tuesday and may remain supported by
geopolitical tensions, analysts said.
Ongoing tension between Israel and Hamas will likely continue
this year, which is poised to provide a cushion for gold prices,
Axis Securities said.
Central banks will also likely accumulate gold at every dip, it
added.
--
Copper prices gained in Asia, supported by weaker production and
overall positive market sentiment, Nanhua Futures analysts
said.
However, copper plants reducing production needs for the winter
season may pressure the base metal slightly, the analysts said.
--
Iron-ore prices rose amid solid demand by steel mills.
Several cities in northern China have recently implemented
emergency emission reduction measures for heavy pollution, which
could weigh on iron-ore production, Huatai Futures analysts
said.
However, steel mills' resilient consumption is ensuring demand
for the steel-making material, they said, adding that the mills'
winter replenishment needs and iron ore's low inventory will likely
further prop up prices.
TODAY'S TOP HEADLINES
China's Private Factory Activity Expands for Second Month
A private gauge of China's factory activity expanded at a faster
clip in December, contrasting with the official index, which fell
deeper into contraction.
The China Caixin manufacturing purchasing managers index rose to
50.8 in December, up slightly from 50.7 in November, according to
data released Tuesday by Caixin Media and S&P Global.
Optimism Abounds on Wall Street This New Year
Wall Street is feeling sunny about the stock market as the
calendar flips to 2024.
Last year's widespread skepticism proved to be misplaced. Stocks
rose through much of 2023, powered by the rise of artificial
intelligence and an economy that stayed stronger than nearly all of
Wall Street had anticipated. The recession that investors had
largely agreed was imminent never came.
Outlook for Chinese Equities May Remain Challenging in 2024
China's equity markets were the worst performers in the
Asia-Pacific region for 2023, and the new year is likely to bring
more of the same, as recovery for the economy and corporate
earnings remains challenging due to the lingering property downturn
and local government debt risks.
Investors are struggling to find conviction that the worst is
over for China's economy amid the country's on-and-off recovery
momentum following the pandemic.
Chinese State-Owned Firms Establish $1.4 Billion Fund
Two Chinese state-owned companies will establish a 10 billion
yuan ($1.41 billion) fund to invest in companies with real estate
project assets.
Under the agreement, New China Life Insurance will be the
limited partner providing CNY9.9 billion in capital and China
International Capital Corp.will act as general partner that will
manage the fund, New China Life said late Monday.
Shale Is Keeping the World Awash With Oil as Conflicts
Abound
A surprise surge in American oil and gas production and exports
is helping to keep the world stocked, blunting the impact of
widening conflict in the Middle East that has crimped key shipping
lanes.
When Iranian-backed Houthi militants began launching missiles
and drones at ships crossing the Red Sea near Yemen in October,
many feared disruption to the vital shipping lane would drive up
energy prices. But oil and gas prices this past month have sunk
about 5% and 23%, respectively.
Netherlands Blocks ASML Exports of Some Chip-Making Equipment to
China
Netherlands has blocked chip-equipment manufacturer ASML's
exports to China of some lithography systems, which are essential
to making advanced microprocessors, in a partial license revocation
following U.S. export restrictions.
The Netherlands-based company said Monday that the Dutch
government recently partially revoked an export license for
shipping the NXT:2050i and NXT:2100i lithography systems to China
in 2023.
Evergrande Auto's Investment Agreement With Dubai Automaker
Lapses
China Evergrande New Energy Vehicle said an agreement for a
Dubai-based automaker to subscribe to its shares has expired,
raising fresh doubts about a potential cash injection for the
Chinese electric-vehicle manufacturer.
The parties to the share subscription and the loan conversion
agreement by Nasdaq-listed carmaker NWTN haven't agreed to extend
the long stop dates, which expired Dec. 31, 2023, Evergrande New
Energy Vehicle, also known as Evergrande Auto, said in a filing
late Monday.
Israel Reshuffles Forces, Prepares for Long-Term Conflict in
Gaza
TEL AVIV-Israel began preparations for prolonged fighting in the
Gaza Strip, reshuffling forces as it weighs how to sustain
lower-intensity fighting over the long term.
Israel's top general said that it would take at least several
more months to destroy Hamas's military capabilities in the
enclave.
How IKEA Downsized to Go Downtown
PARIS-There was no instruction manual when IKEA's Paris team set
to work building a new kind of city-center store.
The Swedish furniture company's ambition was to create a smaller
version of its giant blue-and-yellow suburban stores for downtown
consumers, to be replicated around the world. A quarter of the size
of IKEA's traditional outlets, the central Paris store-the first of
this new type when it opened in 2019-would need to be radically
different, they decided.
Baidu Terminates $3.6B Deal to Buy JOYY's China Live-Streaming
Business
Baidu has called off a $3.6 billion deal to buy JOYY's
video-based entertainment live-streaming business in China.
As of the end of December, the closing conditions for the share
purchase agreement had yet to be fully satisfied, Baidu said in a
filing late Monday.
Big Tech Braces for Wave of Antitrust Rulings in 2024
U.S. antitrust cases against tech giants Google and Meta
Platforms are expected to come to a head in 2024, likely producing
long-awaited rulings that could shape the legacies of top Biden
administration regulators.
Silicon Valley and its critics have seen their patience tested
on some of these cases. A U.S. antitrust case brought against
Alphabet's Google unit in 2020 went to trial in 2023 and now heads
to closing arguments in May.
Write to singaporeeditors@dowjones.com
Expected Major Events for Tuesday
00:01/UK: Dec Shop Price Index
01:01/IRL: Dec Ireland Manufacturing PMI
05:30/NED: Dec Producer confidence survey
06:00/NED: Dec Netherlands Manufacturing PMI
07:00/TUR: Dec Turkey Manufacturing PMI
08:00/CZE: 3Q LFSS Employment & Unemployment
08:00/POL: Dec Poland Manufacturing PMI
08:15/SPN: Dec Spain Manufacturing PMI
08:30/CZE: Dec Czech Republic Manufacturing PMI
08:45/ITA: Dec Italy Manufacturing PMI
08:50/FRA: Dec France Manufacturing PMI
08:55/GER: Dec Germany Manufacturing PMI
09:00/EU: Nov Monetary developments in the euro area (M3)
09:00/GRE: Dec Greece Manufacturing PMI
09:00/EU: Dec Eurozone Manufacturing PMI
09:30/UK: Dec S&P Global UK Manufacturing PMI
10:00/CYP: Nov Retail trade
16:59/AUT: Dec Unemployment figures
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(END) Dow Jones Newswires
January 02, 2024 00:15 ET (05:15 GMT)
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