MARKET WRAPS
Watch For:
No major economic events; trading updates from OMV, Taylor
Wimpey, Marks & Spencer, Whitbread, Tesco
Opening Call:
European shares look set to open higher on Thursday. Asian stock
benchmarks advanced; the dollar weakened; Treasury yields broadly
edged higher; while oil and gold futures also advanced.
Equities:
Stock futures were tracking higher early Thursday as investors
brace for the release of U.S. consumer-price data for December.
EP Wealth Advisors reckoned the CPI report may give investors
enough confidence that disinflation is likely to continue, even if
price levels are "still a very long way from anything that is
considered healthy."
However, the economy has certain factors that are beyond the
Fed's control, such as volatility in supply chains, growing
geopolitical risks, and a potential resurgence in inflation, it
said.
Some analysts caution that the Fed's fight to stamp out
inflation isn't over with last week's payrolls and wage growth data
for December hotter than expected.
"With wages rising year-over-year more than twice as fast as the
Fed's 2% target, we see persistent inflation as a significant
risk," said Jason Hsu, chief investment officer at Rayliant Global
Advisors.
New York Federal Reserve President John Williams on Wednesday
said U.S. interest rates will likely need to stay high "for some
time" until senior central bank officials are confident the rate of
inflation is returning to 2%.
Meanwhile, the earnings season also kicks off in earnest on
Friday, when Bank of America, Citigroup, JPMorgan Chase, and Wells
Fargo are set to report results.
Forex:
The U.S. dollar weakened in Asia with a focus on the U.S.
December CPI data due later.
Risks appear to be tilted to a smaller increase in core CPI of
0.2% on month versus the consensus estimate of 0.3%, CBA said.
A softer outcome could embolden market participants to increase
expectations for FOMC rate cuts and weigh on the USD, it added.
BNP Paribas Asset Management said it expected the euro to rise
against the dollar over 2024 as the relative growth dynamic is
gradually moving in the eurozone's favor versus the U.S.
However, this trend was unlikely to play out for the time being
given near-term uncertainties over when the Fed and the European
Central Bank will start cutting interest rates, it said.
Bonds:
Treasury yields broadly edged higher as investors positioned
ahead of the December inflation report.
Economists expect annual headline CPI inflation, which has been
falling since its peak of 9.1% in mid-2022, to inch up to 3.2% for
December versus 3.1% in November. However, the core reading, which
strips out more volatile items like food and energy, is expected to
decline to 3.8%, from 4% previously.
"Market-based inflation expectations have come way down,
signaling the Fed is going to be successful in fighting inflation,"
said Gregory Faranello, head of U.S. rates trading and strategy at
AmeriVet Securities in New York.
"The question is, if inflation does come down, will that give
the Fed leeway to lower rates despite the fact that the labor
market has held up more robustly than we expected?"
Energy:
Oil futures gained early Thursday after the U.S. government
reported an unexpected weekly rise in commercial crude supplies and
larger-than-expected increases in gasoline and distillate
inventories.
"Ongoing strength in refining activity has resulted in another
week of solid builds to the products," said Matt Smith, Americas
lead analyst at Kpler.
"This full house of bearish builds is offsetting the supportive
influence of Red Sea concerns and Libyan supply disruptions," Smith
said.
However, refining activity is going to drop significantly in the
weeks ahead, as maintenance kicks in to slow product-inventory
builds, he noted.
Metals:
Gold advanced amid geopolitical tensions in the Middle East.
Fears of a further escalation of the Middle East turmoil will
likely continue to benefit the safe-haven asset in the mid-to-long
term, analysts at Founder Cifco Futures said.
As the market has priced in expectations for rate cuts by the
Fed, gold prices have been fluctuating since the beginning of this
year, they said.
Investors would be watching the U.S. inflation data later in the
day to gauge the timeline of the expected rate cuts.
--
Copper rose in Asia.
Overall sentiment on metals remains positive as investors await
the coming U.S. inflation data, Xinan Futures analysts said.
--
Most iron-ore futures declined on prospects of weak demand for
the underlying metal used to make steel.
January's stainless steel spot-market sales cycle may be
shorter, owing to the Lunar New Year holidays and weak demand,
spurring adjustments of production expectations by manufacturers,
information provider Shanghai Metals Market said.
China's stainless steel billet production for January is
estimated at 2.903 million tons, down 3.7% on month, SMM added.
TODAY'S TOP HEADLINES
What to Watch in the CPI Report: Will Inflation's Rapid Downturn
Stabilize?
Consumer inflation ticked up in December but underlying price
pressures continued to ease, analysts estimate, fueling hopes that
the economy can dodge a recession.
Fed's Williams says interest rates need to stay high 'for some
time' to ensure inflation is tamed
New York Federal Reserve President John Williams said U.S.
interest rates will likely need to stay high "for some time" until
senior central bank officials are confident the rate of inflation
is returning to 2%.
Williams made his remarks Tuesday at a speech in White Plains,
N.Y. He is seen as a close ally of Fed Chairman Jerome Powell, so
his words carry a lot of weight in financial markets.
SEC Approves Bitcoin ETFs for Everyday Investors
The U.S. Securities and Exchange Commission voted Wednesday to
allow mainstream investors to buy and sell bitcoin as easily as
stocks and mutual funds, a decision hailed by the industry as a
game changer.
The SEC decision clears the way for the first U.S.
exchange-traded funds that hold bitcoin to be sold to the public.
Expectations of U.S. regulatory approval for such funds drove the
price of bitcoin to the highest level in about two years. The
digital currency traded just below $46,000 late Wednesday, up from
$17,000 in January 2023.
SAP to Pay More Than $220 Million to End Bribery Probes
SAP has agreed to pay more than $220 million to settle foreign
bribery probes brought against the German software maker by U.S.
and South African authorities.
SAP and its co-conspirators paid bribes to foreign officials in
South Africa and Indonesia, delivering money in the form of cash,
wire transfers, political contributions and sometimes luxury goods,
U.S. prosecutors said Wednesday.
South Africa Accuses Israel of Genocide in U.N. Court
The International Court of Justice begins hearings Thursday on
South Africa's accusation of genocide against Israel, contending
that the Jewish state's military response to Hamas attacks launched
from Gaza violates the international treaty drafted in the
aftermath of Nazi Germany's systematic extermination of six million
Jews.
More than 150 countries have ratified the Genocide Convention,
which allows a nation to file a complaint against another it
believes is committing genocide even if, as in South Africa's case,
it has no direct connection to the conflict. South Africa argues
that Israeli military operations, which the Gaza health ministry
says have cost more than 22,000 Palestinian lives, are intended to
wipe out Palestinians in Gaza as a distinct group.
Google Trims Hundreds of Jobs as It Marshalls Resources for
AI
Google laid off hundreds of employees in several areas of the
business on Wednesday, a sign of further cost reductions at the
search giant as it continues to reverse a pandemic hiring
spree.
The cuts affected employees in divisions including those working
on Google's Assistant program, hardware and internal software
tools, the company said. The exact size and scope of the layoffs
couldn't immediately be determined.
Citigroup Taking Charges on Argentina, Russia and Its Own
Restructuring
Citigroup recorded a litany of one-time charges and expenses in
the fourth quarter related to its exposures to Argentina's debt
market, Russia's political instability and the bank's own
restructuring plan.
Citi said Wednesday in a regulatory filing that it set aside
$1.3 billion in reserves to account for risks in Argentina and
Russia. The recent devaluation of the Argentine peso also wiped out
about $880 million in revenue from the bank's services, markets and
banking division, the bank said.
Alaska Airlines cancels 737 Max 9 flights through Saturday
Alaska Air Group Inc. on Wednesday said that it would cancel all
flights using Boeing Co.'s 737 Max 9 jets through Saturday while it
conducts inspections on the aircraft, after a panel tore off of one
such plane used by Alaska Airlines during a flight last week.
The company said the decision would affect 110-150 flights per
day. It said it "continues to wait for documentation from Boeing
and the FAA to begin inspection of our 737-9 Max fleet."
Skydance Backers Explore All-Cash Deal to Gain Control of
Paramount
Shari Redstone, whose family controls Paramount Global, has
entertained several offers over the years to buy its famed movie
studio. Skydance Media CEO David Ellison is eyeing something more
ambitious.
Ellison is discussing an all-cash bid for Paramount's parent,
National Amusements, with financial help from other Skydance
investors including his father, billionaire Larry Ellison,
according to people familiar with the matter. The investors would
buy at least a majority stake in National Amusements from the
Redstones, the people said.
Amazon Is Laying Off Hundreds at Prime Video, MGM Studios and
Twitch
Amazon is eliminating hundreds of jobs across its film and
television studio and Twitch streaming platform in an effort to
rein in costs.
Mike Hopkins, senior vice president of Amazon's Prime Video and
Amazon MGM Studios, announced the studio and video-division layoffs
in an email to staffers Wednesday.
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Expected Major Events for Thursday
05:30/NED: Dec CPI
08:00/SPN: Nov Industrial Production
08:00/SVK: Nov Construction production
08:00/CZE: Dec CPI
08:00/CZE: Nov Import & export price indices
09:00/EU: Dec Long term interest rates statistics
09:00/ITA: Nov Industrial Production
10:00/MLT: Nov Industrial Production Index
10:00/EU: 3Q Quarterly Balance of Payments
10:00/EU: 3Q Quarterly sectoral accounts
10:00/CRO: Dec PPI
11:00/FRA: Nov OECD CPI
11:00/POR: Dec CPI
11:00/IRL: Dec Irish Live Register latest monthly figures
15:59/UKR: Dec CPI
16:59/GER: Nov Balance of Payments
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(END) Dow Jones Newswires
January 11, 2024 00:15 ET (05:15 GMT)
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