MARKET WRAPS
Stocks:
European stocks struggled on Tuesday in a cautious opening session, as investors looked ahead to the latest U.S. inflation data.
Price growth is expected to have fallen, potentially bolstering the case for the Federal Reserve to cut interest rates.
"However, a March rate cut still looks like a very distant possibility," IG said.
The data "will likely set the tone for financial markets over the next two weeks, until the January PCE deflator release on Feb. 29," Santander said.
If the report matches expectations or is lower than forecast then traders may consider a rate cut by the Fed in May is more likely.
Stocks to Watch
The range of plausible outcomes for Maersk's 2024 profitability is wide, though in all cases, profit seems likely to be lower than JPMorgan expected due to a lower benefit from Red Sea disruption and a weaker industry environment.
Against this backdrop, making a potential transformative acquisition of Schenker seems like a bold move, with limited evidence so far that Maersk's integrator strategy is producing significant protection in a weak market, JPM said.
JPM remains neutral on the stock but has lowered its target price to DKK13,300 from DKK14,400.
U.S. Markets:
Stock futures edged lower in early trading, while benchmark Treasury yields were a tad higher.
As well as the inflation data, Tuesday brings a spate of big-name earnings, including Coca-Cola, Marriott International and Airbnb.
Stocks to Watch
Arista Networks shares fell about 6% in premarket trading after it reported results after-hours on Monday that underwhelmed investors.
JetBlue stock was up 14% premarket after activist investor Carl Icahn reported that he had a near-10% stake in the company and might push for board representation.
Forex:
A higher-than-expected U.S. inflation print would add to the dollar's strength, Deutsche Bank Research said.
"On stronger-than-expected core [inflation] data, [and keep in mind 0.4% or above was a rarity in the decade before Covid], dollar gains are likely to be well rounded," Deutsche said.
Exness said the Fed is anticipated to keep interest rates unchanged in March, but expectations continue to change regarding its decision in May and beyond due to uncertainties surrounding the path of inflation.
Traders could also monitor other important data points this week which could generate some volatility for the dollar, it added.
Sterling reached its strongest level against the euro since late August, after data showed the U.K. labor market remains tight and could add to expectations that Bank of England interest-rate cuts won't come any time soon.
Although down from 6.7% in the three months to November, wage growth remains "too high" for the BOE, ING said .
Capital Economics said Switzerland looks set to lead the world's richest nations by cutting interest rates this spring.
Swiss consumer prices rose 1.3% in January compared with 1.7% in December, beating expectations for a slight uptick. With the closely-watched core rate also falling, policymakers at the Swiss National Bank should be encouraged that they can soon start cutting rates, Capital Economics said.
Bonds:
The overwhelming demand during last week's ultra-long sovereign bond sales suggests investors are confident that central banks will deliver aggressive rate cuts by year-end, Saxo said.
However, "a gradual steepening of yield curves, which started last year, and short future position covering in the U.S., may have also played a critical role in igniting investors' demand for the long end," Saxo added.
As the U.S. economy remains robust, and inflation remaining above central banks' target on both sides of the Atlantic, Saxo remains cautious and prefers maturities of up to ten years while taking a selective approach for ultra-long duration.
Energy:
Oil prices edged higher on escalating tensions in the Middle East and uncertainties surrounding the pace of interest-rate cuts ahead of the U.S. inflation data.
A strong U.S. economy and China's stimulus measures are positive for demand and should support oil prices, but a shift in market expectations on interest-rate cuts is weighing on the global demand outlook, according to Swissquote Bank.
Meanwhile, all eyes are on OPEC's monthly report due later on Tuesday and any potential revision to forecast.
"One thing is sure, OPEC will keep fighting to maintain oil prices sustained until the last drop."
Metals:
Base metals and gold were higher ahead of the U.S. consumer price index data.
The timetable for the Fed's expected rate cuts could be illuminated by the report, analysts said.
EMEA HEADLINES
TUI Revenue Soars to Record High on Surging Customer Demand
TUI booked record quarterly revenue, boosted by stronger customer demand, pushing the German travel company's shares higher even as its shareholders prepared to vote on delisting from London.
Shares at 0846 GMT were up 18.50 pence, or 3.2%, at 598 pence.
Michelin to Buy Back Shares After Flat 2023 Earnings
Michelin said it would buy back shares after it reported mostly flat earnings for 2023.
The French tire maker said it made 1.98 billion euros ($2.14 billion) in net profit for 2023, compared with EUR2 billion a year prior, on sales which declined by nearly 1% on year to EUR28.34 billion.
Randstad to Return EUR632 Mln to Shareholders; Net Profit Falls
Randstad said that it will return 632 million euros ($680.8 million) to shareholders as part of its capital allocation policy, and reported a fall in net profit for the fourth quarter of last year.
The Dutch staffing company said Tuesday that it will pay an ordinary cash dividend of EUR2.28 a share and a special dividend of EUR1.27. The capital return reflects the company's strong balance sheet, it said.
GLOBAL NEWS
What to Watch in the CPI Report: Will Inflation Fall Below 3%?
Inflation likely continues to cool. Lots of Americans are still experiencing sticker shock.
China's Shipyards Are Ready for a Protracted War. America's Aren't.
China emerged as a global power by turning itself into the world's factory floor. It is expanding that power, and its military might, with another striking industrial feat: becoming the world's shipyard.
More than half of the world's commercial shipbuilding output came from China last year-making it the top global shipmaker by a wide margin. The once-prolific shipyards of the West that helped forge empires, expand trade and win wars have shriveled. Europe accounts for just 5% of the world's output, while the U.S. contributes next to nothing. Most of what China doesn't build comes from South Korea and Japan.
MSCI Drops 66 Companies From China Index Amid Market Slump
Stock market index compiler MSCI is cutting dozens of companies from its benchmark China index after a prolonged selloff and volatile trading in the world's second-largest economy.
The global index compiler will remove 66 companies in sectors ranging from property and pharmaceuticals to aviation from its MSCI China Index, a quarterly review showed Monday. The deletions from the broad gauge of Chinese shares, which will take effect at the end of the month, include the likes of China Southern Airlines, Greentown China, Weibo and China Everbright Environment Group.
Senate on Verge of Passing $95.3 Billion Ukraine, Israel Aid Package
WASHINGTON-President Biden's drive to send more aid to Ukraine was set to take a big step forward, with the Senate poised to pass a $95.3 billion package that also includes aid for Israel and other allies following months of political wrangling on Capitol Hill.
The Senate's final passage, expected for early Tuesday, comes amid intense GOP infighting over Ukraine, which has been running short of supplies and manpower after a failed counteroffensive against Russia last year. The measure cleared a procedural hurdle late Monday, by a vote of 66 to 33, and a final vote was expected within hours.
Trump Asks Supreme Court to Intervene on Immunity Claim
Donald Trump asked the Supreme Court on Monday to block a recent ruling that denied him blanket immunity for alleged crimes he committed as president, a move that could further delay proceedings on charges he plotted to overturn the 2020 election results.
Trump's lawyers argued in a 39-page filing that the absence of such immunity "threatens the very ability of the president to function properly," and said allowing a trial at the height of the election season "will radically disrupt President Trump's ability to campaign against President Biden."
U.S. Seizes Iranian-Tied Cargo Jet Grounded in Argentina
The U.S. seized a Venezuelan-owned cargo jet with ties to Iran's Islamic Revolutionary Guard Corps that had been grounded in Argentina after its arrival two years ago prompted an investigation into possible terrorism ties, Biden administration officials said.
The Boeing 747, owned by Venezuela state airline Emtrasur, arrived in Florida on Monday, the Justice Department said. The plane had been sold to Emtrasur by Iran's Mahan Air, a transaction that the Justice Department said violated U.S. sanctions laws levied against the private Iranian carrier. Mahan has been blacklisted by the U.S. Treasury for alleged arms trafficking.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
02-13-24 0523ET
