MARKET WRAPS
Stocks:
European stocks rose on Friday, as oil prices jumped after a
U.S.-led coalition launched strikes on Houthi rebel targets in
Yemen.
The coalition launched more than a dozen strikes late Thursday ,
officials said, two days after the Yemeni rebel force defied an
ultimatum to halt its attacks on Red Sea shipping.
The higher energy costs added to higher-than-expected U.S.
inflation data, which pointed to a bumpy last leg of disinflation,
Saxo Markets said. That in turn could see central banks acting more
slowly to cut interest rates.
A U.S. rate cut in March looks increasingly unlikely, MUFG said.
"It seems a difficult backdrop for the [Federal Reserve] to shift
its rhetoric in order to provide guidance on a possible Fed rate
cut in March."
Shares on the Move
Global shipping stocks rose after the strikes on Houthi rebel
targets in Yemen.
"Several shipping stocks have advanced in Asia, and even before
the strikes overnight, we'd already seen a significant rise in
freight costs as a result of the attacks in the Red Sea," Deutsche
Bank said.
European luxury stocks traded lower after Burberry cut guidance,
citing slowing demand for luxury goods.
Burberry said the slowdown in luxury demand was having an impact
on its current performance , and that it experienced a
deterioration in the key December trading period that would lead to
an adjusted profit for the fiscal year ending in March below its
previous expectations.
U.S. Markets:
Stock futures traded mostly higher as Wall Street awaited
quarterly earnings reports from some of the biggest banks.
Major banks including JPMorgan Chase, Bank of America, Citigroup
and Wells Fargo are set to report quarterly results.
Stocks to Watch
Exxon Mobil rose 0.8%, Chevron gained 0.8%, and U.S.-listed
shares of BP were up 1% as oil prices climbed.
Tesla declined 2.2% in premarket trading after it said it
planned to halt production at its Berlin factory for two weeks as
the conflict in the Red Sea continues to disrupt transport
ships.
Forex:
The euro could weaken against the dollar near term as markets
trim U.S. rate-cut expectations after Thursday's inflation data,
Societe Generale Researchsaid.
U.S. money-market pricing of a March rate cut--which assigns a
68% probability--is premature, it said.
"EUR/USD has already tested 1.10 twice [this year] without
managing to break upwards," SocGen said.
"While we maintain a bullish EUR/USD forecast (towards 1.15)
this year, downside risks will likely prevail in the near
term."
Bonds:
Strong performance by eurozone peripheral government bonds is
expected early this year after strong demand from investors for
syndicated deals year-to-date, but heavy issuance ahead is likely
to eventually weigh on their performance, Societe Generale Research
said.
Given heavy supply this year and more long-dated syndicated
transactions as well as larger auctions expected, SocGen expects
supply fatigue to build eventually, putting pressure on yields and
spreads.
Inflation-linked government bond issuance in the eurozone is
expected to fall to EUR51 billion in 2024 from EUR66 billion last
year, which would imply the lowest share of linkers in euro bond
issuance since 2009, Citi Research said.
This forecast decline is driven by Germany's decision to
discontinue linker issuance as well as Citi's assumption that Italy
might favor issuing BTP Valore instead of BTP Italia to cater
retail demand.
German Bund yields are undoing the late-2023 rally as markets
scale down early rate cut expectations,Societe Generale Research
said.
"We see more upside to Bund yields, in outright terms and vs
swaps, driven by a gradual re-building of term premia as the free
float of sovereign paper continues to grow."
Energy:
Oil prices jumped after the airstrikes against Houthi rebels in
Yemen .
The strikes heightened fears of a wider conflict in the Middle
East and came shortly after Iran seized an oil tanker off the coast
of Oman, adding to concerns over global shipping disruptions.
"Geopolitical risks continue to grow in the Middle East," ING
said.
"The Gulf of Oman is very near the Strait of Hormuz, a critical
choke point for oil flows. [...] more significant disruptions to
oil flows in this region will be much more alarming for
markets."
Metals:
Metal prices traded higher after U.S. CPI data showed inflation
rose more than expected, challenging market hopes for interest-rate
cuts early this year.
Meanwhile, the latest trade data from top metals buyer China
revealed exports beat expectations in December , a sign that demand
could be picking up, while imports also rose.
EMEA HEADLINES
U.K. Economy Grew More Than Expected, Though Recession Risks
Remain
The U.K. economy expanded by more than expected in November,
driven by services-sector growth, though the question of whether or
not the economy fell into a recession in the second half of 2023
remains on a knife edge.
Gross domestic product rose by 0.3% from a month earlier,
according to figures published Friday by the Office for National
Statistics. Economists polled by The Wall Street Journal had
expected GDP to grow by just 0.2%.
Airbus Shatters Record for Jet Orders as Demand Soars
LONDON-Airbus, the world's biggest plane maker, smashed its
near-decade old record for the highest number of orders in a single
year, as airlines scramble to secure the limited availability of
new aircraft.
The company said it had booked 2,319 gross orders last year,
more than twice the number in 2022 and 29.1% higher than its 1,796
record set in 2014.
GLOBAL NEWS
Deflation Worries Deepen in China
HONG KONG-China's consumer prices fell for a third straight
month in December, underscoring the challenges Beijing faces in
reviving its economy as deflationary pressures persist.
An index of prices charged by Chinese manufacturers, meanwhile,
contracted for a 15th straight month. That is a source of growing
concern for U.S. and European officials, as some Chinese business
owners look to unload more low-cost goods on the rest of the world,
competing with Western brands.
Nikkei's Hot Run Continues; Hits Fresh 34-Year High
The Nikkei Stock Average rose to a fresh 34-year high,
underpinned by expectations for the Bank of Japan to maintain its
super-loose accommodative monetary policy stance and a weaker
yen.
Japan's benchmark index advanced 1.5% to 35577.11 on Friday,
reaching its highest closing level since February 1990, after
hitting near 34-year highs for the past three days. The index
gained 6.6% for the week, the largest weekly gain since the week
ended March 18, 2022, according to FactSet.
Hunt for Critical Minerals Draws World Powers to Saudi
Arabia
RIYADH, Saudi Arabia-The U.S., China and Russia are racing to
secure critical metals needed to power the energy transition away
from fossil fuels. Their latest battleground: oil-rich Saudi
Arabia.
Government officials and top mining executives descended on
Riyadh this week to tap in to the gusher of cash the Saudis are
pouring into mining investments. The kingdom is positioning itself
at the center of a "super region" extending from Central Asia to
the Middle East and Africa, which it says holds at least a third of
the world's natural resources, including critical minerals.
Iran Seizes Oil Tanker Linked to U.S. Sanctions Dispute
The Iranian Navy said it had seized an oil tanker off the coast
of Oman that has been at the center of a dispute between Tehran and
Washington, raising the stakes as a U.S.-led coalition launched
strikes on rebel targets in Yemen.
The seizure came as Secretary of State Antony Blinken wrapped up
a weeklong tour of the region aimed at cooling tensions there,
especially in the waters of the Middle East, where attacks have
risen since the Israel-Hamas war began.
Israelis Express Outrage at Genocide Accusation in U.N.
Court
TEL AVIV-When South Africa presented its case in The Hague on
Thursday that Israel is committing genocide in Gaza, many Israelis
saw an accusation that turned the victim into the perpetrator,
negating the Holocaust and the atrocities committed against them by
Hamas on Oct. 7.
South Africa argued at the International Court of Justice that
Israeli military operations in Gaza are intended to wipe out
Palestinians as a distinct group. Israel has rejected the
accusation and is expected to rebut it at a hearing at the United
Nations court on Friday.
Write to ina.kreutz@wsj.com
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(END) Dow Jones Newswires
January 12, 2024 05:38 ET (10:38 GMT)
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