MARKET WRAPS
Watch For:
CPI data for Germany, Baden-Wuerttemberg, Hesse, Brandenburg,
Bavaria, North Rhine Westphalia, Saxony, France; Services PMI data
for Eurozone, U.K., France, Germany, Italy; U.K. Money and Credit;
trading updates from Next
Opening Call:
European stock futures were treading water early Thursday. Asian
stock benchmarks were broadly lower; the dollar weakened slightly;
Treasury yields were little changed; oil futures and gold
advanced.
Equities:
European stock futures were little moved after a negative lead
from Wall Street overnight.
U.S. stocks finished lower Wednesday after minutes from the
Fed's December meeting showed policymakers had a high level of
uncertainty around their interest-rate projections.
The minutes showed that officials agreed that the rate-increase
cycle that started in 2022 was likely at an end but offered no
timetable on cuts.
Officials have signaled that the Fed cut interest rates three
times this year while interest-rate derivatives traders have placed
bets implying about six cuts in 2024.
"There remains a wide gap between market expectations and what
the Federal Reserve has communicated," said Bill Northey, senior
investment director at U.S. Bank Wealth Management.
As a result, coming data releases, like December's jobs report
due Friday and inflation data scheduled for next week, could spark
major moves in markets, he said..
Forex:
The U.S. dollar weakened slightly.
The dollar could rise over the next one to three months as the
market reassesses significant expectations for U.S. interest-rate
cuts this year, Rabobank said.
In December, the Fed signaled around three 25 basis-point rate
cuts for 2024, but the market is currently looking for about twice
that, it said.
"With so many Fed rate cuts currently in the price, we envisage
that the dollar could strengthen on a 1-to-3-month view vs a basket
of currencies."
The dollar should end the year softer, however, due to rate cuts
and improved risk appetite, it added.
Bonds:
Treasury yields were little changed after finishing lower on
Wednesday, as minutes from the Federal Reserve's December meeting
raised uncertainty about the path of monetary policy in 2024.
Jeffrey J. Roach, chief economist at LPL Financial, said the
minutes show that Fed officials realize the "incredible amount of
uncertainty" surrounding the macro landscape and want to keep their
options open.
The minutes also imply the Federal Open Market Committee will
"likely hold rates steady" in March but will start preparing the
markets for a cut later in the year should economic growth falter,
Roach said.
Energy:
Oil continued to rise after reports of fatalities on Wednesday
following explosions at a ceremony held to mark the fourth death
anniversary of an Iranian military officer.
Prices also found support on the back of reports that Libya's
largest oilfield has been shut down due to protests.
Overall, the oil market seems "likely to be in rough balance,
but uncertainty about supplies abound - from sanctions on Iran,
Russia and Venezuela having less effect, to the possibility that
[U.S. President Joe] Biden will try to tighten them," said Michael
Lynch, president of Strategic Energy & Economic Research.
Meanwhile, Angola quitting the OPEC as a member is raising
concerns that the "group might be having increasing trouble
maintaining prices," said Lynch.
"The Saudis are carrying most of the burden and that might get
old."
Metals:
Gold rose in Asia in a likely technical upward correction after
front-month Comex gold for January delivery settled 1.5% lower
overnight.
Mild USD weakness, which typically has an inverse correlation
with the precious metal, was also likely supporting prices.
However, there are signs of liquidation of long gold positions
by the top ten traders in Shanghai over the last few sessions,
which seem to corroborate consolidation in gold markets, said TD
Securities.
--
Copper prices rebound after hitting a two-week low on
Wednesday.
Although prices may fall in the short term on recent dollar
strength and lower demand, copper is likely to remain strong in the
long term, Guotai Junan Securities analysts said.
The USD could weaken as the Fed is likely to lower interest
rates this year while lower inventories globally may support the
copper prices, they added.
--
Iron-ore prices advanced amid positive sentiment and low
inventories.
Steel demand will likely rise in 1H amid expectations for more
stimulus measures to support China's property sector and
infrastructure projects, and lift the steel-making material's
price, analysts at Galaxy Futures said.
Meanwhile, iron-ore inventories will likely remain tight in 1H
amid a seasonal shipment off-season, they added.
TODAY'S TOP HEADLINES
Stocks' Bad Start to 2024 Has Forecasters On Edge
Stocks are off to a bumpy start in the early days of 2024.
Proponents of the January Barometer are hoping for a turnaround
because they believe the market's performance in the first month of
the year sets the tone for the rest.
Major indexes have pulled back in the first two sessions after
ending 2023 with a bang. The S&P 500 has fallen 1.4%, and the
Dow Jones Industrial Average has declined 0.7%. The Nasdaq
Composite has dropped 2.8%, its worst start to a year since
2005.
Fed Minutes Suggest Rate Hikes Are Over, but Offer No Timetable
on Cuts
Federal Reserve officials thought they were done raising
interest rates when they decided last month to hold them steady,
but minutes of the meeting didn't reveal a meaningful debate about
when to start lowering rates.
While nearly all officials anticipated policy rates would
eventually be lowered before the end of this year, the written
account of the Dec. 12-13 meeting, released Wednesday, underscored
heightened uncertainty over how to navigate the next interval of
monetary policy after the most rapid increase in interest rates in
four decades.
Fed's Tom Barkin Says a Soft Landing Is 'in No Way
Inevitable'
The latent effects of Federal Reserve rate hikes and companies
boosting prices as inflation broadly cools could threaten a soft
landing for the economy in 2024, a top Federal Reserve official
said.
"After decades without pricing power, businesses, especially
those facing margin pressure, won't want to back down from raising
prices until their customers or competitors force their hands,"
Richmond Fed President Tom Barkin told an audience of
businesspeople on Wednesday in Raleigh, N.C.
China Services Activity Rose to Five-Month High in December
A private gauge of activity in China's services sector rose to a
five-month high in December, in contrast with an official index
that remained in contraction.
The Caixin services purchasing managers index climbed to 52.9 in
December from 51.5 in November, Caixin Media Co. and S&P Global
said Thursday. A reading above the 50 mark suggests activity
expansion, while a reading below that level indicates
contraction.
Lithium Prices Ready to Rally Once More
SYDNEY-Lithium is one of Janus Henderson Investors' top
commodity bets for 2024, despite the metal having a rocky run in
recent months as investors fret that the energy transition is
happening more slowly than thought.
Prices of lithium have fallen to around two-year lows as supply,
including from Australia, outpaces demand for a metal that's a key
component of electric-vehicle batteries and other technology such
as smartphones. Electric-vehicle sales in the U.S. have plateaued
in recent months, wrong-footing some automakers that had
anticipated stronger demand.
The 'CEO' of Hamas Who Found the Money to Attack Israel
When Zaher Jabarin ran a Hamas cell in the 1980s, he borrowed
cash from his mother to buy weapons. Now, he oversees a financial
empire that the U.S. estimates is worth hundreds of millions of
dollars and funds Hamas's operations against Israel.
The 55-year-old militant manages Hamas's financial relationship
with its main benefactor Iran and handles how Tehran gets cash to
the Gaza Strip, U.S. and Israeli officials say. He looks after a
portfolio of companies that deliver income annually for Hamas and
runs a network of private donors and businessmen who invest for the
Islamist group.
U.S. Seeks Drone Bases in Coastal West Africa to Stem Islamist
Advance
NAIROBI-The U.S. is seeking to base military drones along the
West African coast in an urgent effort to stop the spread of al
Qaeda and Islamic State in the region, according to American and
African officials.
The U.S. is holding preliminary talks to allow American unarmed
reconnaissance drones to use airfields in Ghana, Ivory Coast and
Benin, countries on the Atlantic Ocean. Relatively stable and
prosperous, the three coastal countries, along with Togo, now find
themselves threatened by Islamist militants surging south from
Mali, Burkina Faso and Niger-three beleaguered nations in the
Sahel, the semidesert band south of the Sahara.
U.S., Allies Give Houthis Ultimatum: Stop Ship Attacks or Face
Consequences
WASHINGTON-The U.S., Britain and key allies issued what
officials described as a final warning to the Houthi Yemeni rebel
group Wednesday to cease its attacks on international shipping in
the Red Sea or bear the consequences.
"Ongoing Houthi attacks in the Red Sea are illegal,
unacceptable, and profoundly destabilizing," says the statement
issued by more than a dozen nations. "The Houthis will bear the
responsibility of the consequences should they continue to threaten
lives, the global economy, and free flow of commerce in the
region's critical waterways."
Labor Board Backs Fired SpaceX Employees
An official for the U.S. labor-relations agency has accused
SpaceX of violating a federal workplace law by firing employees who
circulated a letter criticizing founder Elon Musk.
The former employees, along with around 400 other SpaceX
workers, signed a letter in the summer of 2022 that called Musk's
public statements and behavior embarrassing and distracting. It
asked SpaceX management to publicly separate the company from
Musk's personal brand.
Intel Names Justin Hotard as EVP, GM of Data-Center and AI
Group
Intel appointed Justin Hotard as executive vice president and
general manager of its data-center and AI group, effective Feb.
1.
The semiconductor giant said Hotard would report directly to
Chief Executive Pat Gelsinger. Hotard would be responsible for
Intel's suite of data-center products.
Thermo Fisher Says It Has Halted Sales of DNA Technology in
Tibet
Instrumentation maker Thermo Fisher Scientific said it no longer
sells certain DNA-based human-identification products in Tibet,
building on a similar halt of sales to China's Xinjiang region of
technology that human-rights groups allege can be misused by local
police forces.
The decision by Waltham, Mass.-based Thermo Fisher follows its
pledge almost five years ago to stop sales of the items in
Xinjiang, a move that also followed pressure from human-rights
groups. The company didn't say whether either regional action will
affect its business in other parts of China.
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Expected Major Events for Thursday
01:01/IRL: Dec Ireland Services PMI
06:30/GER: Dec North Rhine Westphalia CPI
07:00/ROM: Nov PPI
07:30/HUN: Nov Preliminary External Trade
07:45/FRA: Dec Provisional CPI
08:15/SPN: Dec Spain Services PMI
08:45/ITA: Dec Italy Services PMI
08:50/FRA: Dec France Services PMI
08:55/GER: Dec Germany Services PMI
09:00/GER: Dec Hesse CPI
09:00/GER: Dec Brandenburg CPI
09:00/GER: Dec Baden-Wuerttemberg CPI
09:00/GER: Dec Bavaria CPI
09:00/EU: Dec Eurozone Services PMI
09:30/UK: Nov Money and Credit - Lending to Individuals, Lending
to Businesses, Broad Money and Credit
09:30/UK: Nov Monetary & Financial Statistics
09:30/UK: Nov Bank of England effective interest rates
09:30/UK: Dec UK Official Reserves
09:30/UK: Dec S&P Global UK Services PMI
09:30/UK: Dec Narrow money (Notes & Coin) and reserve
balances
10:00/GER: Dec Saxony CPI
10:00/CYP: Dec Registered Unemployed
10:00/CYP: Dec CPI
10:00/GRE: Nov Labour Force Survey
13:00/GER: Dec Provisional CPI
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(END) Dow Jones Newswires
January 04, 2024 00:15 ET (05:15 GMT)
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