MARKET WRAPS
Stocks:
European stocks mostly drifted lower on Monday as traders continued to assess the outlook for interest rates and inflation.
Danske Bank Research said it expected three interest-rate cuts from the European Central Bank this year but data suggest a growing possibility of fewer than this, based on recent inflation prints and, not least, the ECB's focus on the domestic measure and services inflation.
This contrasts with two months ago, when "risks were skewed to more than 3 cuts," Danske said.
Stocks to Watch
Entain shares have remained weak in 2024, falling 20% year-to-date, and the absence of a permanent CEO creates a muted sentiment, Berenberg said.
Coming regulatory changes in the U.K and the Netherlands are expected to have a GBP40 million impact on the group. As a result, the Berenberg makes further underlying downgrades, with fiscal 2024 Ebitda now expected to decrease GBP40 million, in line with the anticipated regulatory impact.
For fiscal 2025, Berenberg's Ebitda estimate is 4% lower due to a further regulatory hit, particularly in first-half. However, it said patience was needed as some stabilization within the group is expected along with further progress in the U.S.
U.S. Markets:
Stock futures edged lower, while Treasury yields were roughly flat.
On the data front, new home sales are due, while earnings are scheduled from BuzzFeed.
The week ahead is filled with economic data, including the personal consumption expenditures price index, the Federal Reserve's preferred inflation measure. Earnings are due from Carnival on Wednesday and Walgreens on Thursday, among others.
Forex:
The dollar rose and could stay high for now, helped by a surging U.S. stock market and a solid U.S. economy, although the prospects of forthcoming Fed rate cuts should cause the currency to fall in the second quarter, ING said.
"A surging U.S. stock market and the implications for U.S. confidence and consumption make it hard to argue with the dollar right now, warning that DXY can push up to the 105.00 area. But we continue to expect this strength to be temporary and would prefer to position for a second-quarter downtrend."
UBS Global Wealth Management said major currencies could continue to stick within recent ranges as central banks look set to cut interest rates roughly in tandem.
However, there could be some opportunities for currency investors as the dollar could fluctuate as it stays "caught between decent U.S. growth and the prospect of Fed rate cuts."
Citi Research expects sterling to weaken against the dollar--which it favors broadly against other G10 currencies--due to the prospect that the Bank of England could cut interest rates earlier than previously expected.
"Our U.K. economist views May as live for the BOE following a dovish vote split on their rates hold. A more dovish BOE may well lead to a weaker sterling."
Bonds:
Treasurys continue to trade not far from fair value, BlueBay Asset Management said.
"Although data may continue to push against lower rates, we think that market participants will accept the idea that rate cuts can be pushed back, just as long as they continue to maintain confidence that a substantive easing cycle will follow."
This latter facet is something that BlueBay remains "inclined to question."
UBS Global Wealth Management continues to see an attractive risk-reward outlook for quality bonds, including government and investment grade corporate bonds.
"The high level of outright interest rates on the asset class will be a key source of total return."
As short-end policy rates look set to fall and downside risks to growth are nonnegligible, UBS GWM also sees potential for capital gains.
Eurozone sovereigns are set to reach 34% of 2024 gross government bond issuance targets at the end of the first quarter, compared with 31% in the first quarter of 2023, LBBW said.
Energy:
Oil futures were higher in European trade, on signs of tightness in the market and growing geopolitical concerns and despite a stronger dollar.
The United Nations Security Council is set to vote later on Monday on a new draft resolution for an immediate ceasefire in Gaza amid increasing calls for a truce from the international community.
Metals:
Base metals and gold rose.Bullion gained on lingering inflation concerns while copper made fresh advances on signs of strong buyer interest.
XTB said gold's position as an inflation hedge has supported its rally so far this year as central banks get ready for interest rate cuts, and residual concerns about lingering inflation should keep the price supported.
XTB said copper could make further fresh gains after the number of outstanding contracts soared about 300,000 last week, the highest level in 2.5 years and a sign of strong buyer demand.
EMEA HEADLINES
Kingfisher Backs Midterm Views for French Business Ahead of Restructuring
Kingfisher backed medium-term guidance for its French business as it outlined plans to simplify its organization in the country.
The home-improvement retailer said Monday that it will simplify the business organization in France to improve performance and profitability of Castorama and Brico Deppt, supporting its medium-term retail profit margin target for France of around 5% to 7%.
MTN Group Backs Midterm Views Despite Earnings Decline
MTN Group backed its medium-term targets despite warning of increased headwinds after a sharp drop in earnings.
The South Africa-based telecommunications group said Monday that it expects service revenue percentage growth for the medium term to be at least in the mid-teens in constant currency terms.
GLOBAL NEWS
Are Chinese Tech Stocks Value Plays Now?
For investors in Chinese technology stocks nursing their wounds, the good news is that they are now value stocks: They are boosting dividends and buybacks, have enormous cash balances and are generating huge amounts of cash at cheap valuations.
The bad news is also that they have become value stocks. The heady growth days of yore don't seem likely to come back.
Fed Rate Outlook Looks Just Right for Banks
When it comes to interest rates, banks need a Goldilocks scenario: Not too hot, not too cold. The Federal Reserve looks set to deliver.
Surging interest rates gave banks plenty of headaches, to put it mildly, ranging from a rapid repricing of deposits to a plunge in the value of their longer-term fixed-rate securities. Yet a sharp pivot toward lower rates wouldn't have been great either, putting pressure on interest income from their shorter-term and floating-rate assets.
The Short-Vol Trade Is Back: Why Some Investors Think It's Driving Tranquility in Markets
The stock market is calmer than it has been in years. Some worry that a popular strategy is contributing to the tranquility.
Measures of market volatility have fallen to levels last seen in 2018, while major stock indexes have climbed to repeated all-time highs. The S&P 500 is up 9.7% in 2024 and has set 20 closing records.
Trump's $454 Million Judgment Is Due. New York Is Coming to Collect.
Donald Trump for weeks has sought to avoid paying a $454 million civil judgment against him for fraud in New York. Collection day has come.
The former president has been trying to persuade an appeals-court panel to put the penalty on pause while he continues to challenge it, but that court hasn't yet ruled. Earlier, a single judge on that court declined to postpone the payment or allow Trump to submit a partial $100 million bond while he appeals. Trump's legal team has said it is virtually impossible to secure a bond to cover the whole amount.
Repeated Raids in Gaza Raise Prospect of Endless War
Israeli forces are fighting in a growing number of places in the Gaza Strip that they previously took and withdrew from, showing how Israel is struggling to eliminate Hamas and bring the Palestinian enclave under its control.
On Sunday, fighting between Israeli forces and Hamas militants intensified around Nasser Hospital in Khan Younis and Al-Shifa Hospital in Gaza City, with the Israeli military saying it struck dozens of targets. Israeli troops previously fought battles in the same places in recent months and said that Hamas's formations in those areas had been defeated and dismantled.
Attack on Russian Concert Hall Threatens Putin's Strongman Image
Last week, Russian President Vladimir Putin dismissed American warnings of an imminent terrorist attack and urged leaders of the country's security services to focus on catching Ukrainian spies instead.
Three days later, Islamic State gunmen rampaged through a concert hall outside Moscow, killing more than 130 people in the deadliest episode of terrorism in Russia in decades.
'A Ticking Time Bomb': In Syrian Camps, Fears of an Islamic State Revival
AL-HOL, Syria-A recent security sweep inside a sprawling fenced refugee camp holding 44,000 people turned up a raft of weapons, dozens of Islamic State militants and a Yazidi woman who had been held by the group for nearly 10 years.
For many, the horrors of Islamic State ended when a U.S.-led military campaign collapsed the group's self-styled caliphate in 2019. But five years later, tens of thousands of civilians are still being kept in camps including in Al-Hol, which are filled with the families of Islamic State militants and others inadvertently swept up in the chaos of northeast Syria.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
03-25-24 0651ET
