UKX FTSE 100 Index

MARKET WRAPS

Watch For:

EU unemployment; Germany industrial production index; Italy unemployment; trading updates from BMW, B&M European Value Retail

Opening Call:

European shares look set to open higher Tuesday. Asian stock benchmarks advanced; the dollar steadied; Treasury yields edged lower; while oil and gold futures pushed higher.

Equities:

Stock futures advanced early Tuesday, tracking positive cues from U.S. and Asian markets. Investor focus is on inflation data due this week, including the December reading of the consumer-price index on Thursday in the U.S. and the producer-price index on Friday.

"This week's inflation data could determine whether last week's pullback is a blip on the radar or something larger," said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley.

"The S&P 500 started the year with three straight down days for just the ninth time since 1991, and jobs data showed the labor market is still percolating," he said.

Forex:

The U.S. dollar was steady in Asia, but could weaken on U.S. rate-cut hopes spurred by Fed officials' comments overnight.

Atlanta Fed president Raphael Bostic and Fed governor Michelle Bowman indicated that both were satisfied that U.S. inflation is on a steady downward path to reach the Fed's target, said Alvin T. Tan, head of Asia foreign-exchange strategy at RBC Capital Markets.

Bowman added that Fed rate cuts would be appropriate as inflation approached closer to the target, Tan noted.

Bonds:

Treasury yields edged lower early Tuesday after falling for the first time in three sessions on Monday. A December New York Fed survey showed consumer expectations for inflation declining across all time horizons.

"Our base case scenario is for a soft landing, in which growth slows to just below trend, a U.S. recession is avoided, inflation falls toward central bank targets by the second half of the year, and the Fed cuts interest rates by 100 basis points," said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

"We think growth headwinds in the U.S. are unlikely to lead to higher precautionary savings, and that inflation should fall at a more gradual pace," Marcelli said.

"Though markets are now pricing steeper rate cuts than our forecast, we think the Fed is trying to balance its desire to help the economy avoid recession with labor market and core inflation data that still suggest a need for somewhat restrictive monetary policy."

Energy:

Oil futures edged higher in Asia after falling overnight. Saudi price cuts on crude oil exports have fueled concerns about weak global oil demand, but Houthi attacks on ships in the Red Sea and oil supply disruption in Libya could prop up oil prices, Saxo Markets said.

Investors will keep an eye on the EIA's energy outlook report, as well as further expectations of a cut in China's RRR, to gauge movement in oil prices, Saxo said.

Metals:

Gold prices rose early Tuesday amid better sentiment. U.S. Fed Gov. Michelle Bowman retreated from her long-time hawkish view, saying U.S. monetary policy is sufficiently restrictive and hinting at her willingness to support rate cuts as inflation eases, Nanhua Futures said.

Gold prices could continue to fluctuate as markets debate the likelihood of the Fed lowering interest rates in 1Q, Nanhua said. Focus is on the key U.S. inflation data due later this week.

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Copper rose slightly, boosted by speculation of a possible PBOC reserve-requirement-ratio cut that may support China's economic growth and demand for the industrial metal.

Whispers are growing louder about RRR cuts in the offing, said Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank. Given the overhang of sluggish demand showing up in slipping PMIs in China, it is a matter of time--probably sooner rather than later--before Mizuho Bank's call for 50 bps-100 bps of RRR cuts is validated, Varathan added.

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Most iron-ore futures declined on possible position adjustments. However, iron ore is most exposed to China's policy-easing measures, and policymakers are likely to ramp up support for some projects in China, which would support steel and iron-ore demand, Citi Research said.

Citi has raised its target on the iron-ore price for up to three months to $150 a ton from $140 a ton.

TODAY'S TOP HEADLINES

Fed's Bowman says inflation could drop without further rate hikes

Federal Reserve governor Michelle Bowman on Monday said her hawkish stance on monetary policy has "evolved," and she now sees the chance that inflation could continue to come down without further interest-rate hikes.

In remarks to the South Carolina Bankers Association, Bowman said that if inflation continues to decline, it will eventually become appropriate to cut rates to keep policy from putting too much downward pressure on growth.

NY Fed: It's been years since consumers felt this good about where inflation could go next

Americans say inflation rates will keep cooling in the year ahead, according to Monday data offering another sign of a brightening mood on inflation.

Looking ahead one year, consumers expect the inflation rate to fall to 3%, according to the Federal Reserve Bank of New York.

Biden Urged to Curb China's Dominance of Older-Generation Chips

The Biden administration needs to take stronger action to stem China's growing dominance in making older-generation microchips that are essential across several U.S. industries, according to the bipartisan leaders of a House of Representatives panel.

The lawmakers' call for new efforts, including potential tariffs, is intended to counteract an overreliance on China for less-advanced chips, according to a letter seen by The Wall Street Journal. Republican Mike Gallagher of Wisconsin, chairman of the House Select Committee on the Chinese Communist Party, and Raja Krishnamoorthi of Illinois, the committee's ranking Democratic member, wrote to President Biden's top business and trade officials on Friday.

PepsiCo, Grocery Giant Bicker Over Who Dumped Whom

A breakup over grocery prices got messier Monday when PepsiCo said that it, not supermarket chain Carrefour, initiated the split.

PepsiCo said that it had decided to stop supplying the chain's European stores because the two sides hadn't reached an agreement on a new contract.

France's Prime Minister Resigns After Immigration Fight Splits Macron's Party

PARIS-France's bruising battle over immigration has cost President Emmanuel Macron his cabinet.

On Monday, French Prime Minister Élisabeth Borne resigned after her ranks fractured over the passage of a contentious immigration bill that boosts authorities' power to deport foreigners and limits access to welfare and citizenship.

Hezbollah Commander Killed as Israel Strikes Militants in Lebanon

A senior Hezbollah commander was killed in Lebanon in what the group said was the second recent assassination by Israel of a militant leader there, as Israel showed it is willing to target Iran-backed forces across the border while avoiding an all-out war.

Hezbollah said the commander, Wissam Hassan Al-Tawil, was killed on Monday in an Israeli attack in a village in southern Lebanon. The Israeli military said jet fighters struck Hezbollah targets in Lebanon after a missile was launched toward northern Israel, but Israel didn't say if Tawil's death was related to the airstrikes or if the commander had been targeted.

United, Alaska Find Loose Parts on Some Boeing 737 MAX 9 Jets

United Airlines and Alaska Airlines have discovered loose parts on Boeing 737 MAX 9 jets that they have inspected after a near-catastrophe on a flight Friday, signaling Boeing's issues go beyond the aircraft that made an emergency landing.

U.S. air safety officials grounded the Boeing jets and are still investigating what caused an emergency-door plug to detach from an Alaska Airlines plane flying at 16,000 feet, leaving it with a gaping hole.

Amazon Is Going 'Super Aggressive' on Generative AI

For cybersecurity leaders, generative artificial intelligence evokes hopes of outsmarting relentless hackers, on one hand, and fears of security staff being replaced by the tech on the other.

For Stephen Schmidt, chief security officer at Amazon.com, reality resides in the middle.

Novartis in Advanced Talks to Buy Cytokinetics

Novartis is close to clinching an acquisition of Cytokinetics and its promising heart drug, as big pharmaceutical companies continue to snap up fast-growing biotechs to replenish their pipelines.

A purchase by the Swiss drug company of South San Francisco-based Cytokinetics, which has a market value of more than $10 billion, could be completed as soon as this week, according to people familiar with the situation. Cytokinetics has been running a sale process, and it is possible another suitor could re-emerge; there also might be no deal at all.

What Nvidia Does for an Encore

How does any company follow up a year in which business doubled and market value tripled? For Nvidia, that answer seems to be: staying the course.

Nvidia announced its latest initiatives in videogaming and automotive technology on Monday, ahead of the CES trade show kicking off this week in Las Vegas. The company has long used the annual consumer-electronics conference to showcase its products for those two markets. The new announcements lean heavily into the generative artificial-intelligence theme that has made the once-niche chip maker into a household name, including new GeForce graphic processors designed for AI-enabled PCs and laptops. Nvidia also announced new EV makers adopting its automated-driving system.

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Expected Major Events for Tuesday

00:01/UK: Dec BRC-KPMG Retail Sales Monitor

00:01/UK: CBI Financial Services Survey

00:01/UK: Dec Scottish Retail Sales Monitor

05:30/NED: Nov Consumer Spending

06:45/SWI: Dec Unemployment

07:00/GER: Nov Industrial Production Index

07:00/ROM: Nov International trade

07:00/DEN: Nov Balance of payments (provisional figures)

07:00/DEN: Nov External trade (provisional figures)

07:30/HUN: Nov Preliminary Industrial Production

07:45/FRA: Nov Foreign trade

07:45/FRA: Nov Balance of Payments

08:00/AUT: Oct Foreign Trade

08:00/SVK: Nov Foreign trade

08:00/SWI: Dec SNB foreign currency reserves

08:00/CZE: Dec Unemployment data

09:00/ITA: Nov Unemployment

10:00/GRE: Nov External Trade (provisional data)

10:00/CRO: Nov Foreign Trade

10:00/EU: Nov Unemployment

10:00/CYP: Nov Foreign Trade (provisional)

10:00/MLT: Nov International Trade

11:00/IRL: Nov Retail Sales Index

11:00/POR: Nov International trade statistics

11:00/IRL: Nov Industrial Production and Turnover

16:59/POL: Polish interest rate decision

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(END) Dow Jones Newswires

January 09, 2024 00:16 ET (05:16 GMT)

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