MARKET WRAPS

Stocks:

European shares edged higher on Monday at the start of one of the busiest weeks in the central-bank calendar.

The Federal Reserve meets on Tuesday before announcing its monetary-policy decision a day later. At the start of the year, traders piled into bets that the central bank would cut rates at this meeting. But signs that the inflation monster hasn't yet been vanquished have prompted a rethink.

Ahead of the Fed, the Bank of Japan is expected to raise rates Tuesday-a move that would make it the last major central bank to emerge from negative borrowing costs, while investors expect the Bank of England to hold rates steady on Thursday.

Other central banks meeting this week include the Swiss National Bank, Norges Bank and the Turkish central bank, as well as several others in Asia-Pacific and Latin America.

Stocks to Watch

Reckitt Benckiser could be exposed to a growing number of cases after an Illinois jury ordered the company's Mead Johnson unit to pay $60 million in compensation related to the death of a premature baby who was fed Enfamil infant formula, Barclays Capital said.

"An extreme financial worst case for Reckitt would, in our view, be GBP2 billion of damages."

Barclays believe there could be a few thousand plaintiffs with cases settling in the high hundreds of thousands of dollars.

Reckitt said it would pursue all options to overturn the Illinois jury verdict.

Barclays described Friday's share rout as a substantial over-reaction.

"While full clarity will take time to emerge, precedent suggests investors will feel more comfortable over the coming weeks," Barclays said.

Economic Insight

The European Central Bank is more likely than the Federal Reserve to embark on sequential interest-rate cuts given prevailing growth differentials, J.P. Morgan Asset Management said.

JPM AM expects both the Fed and the ECB to start cutting interest rates in June, but the Fed is likely to proceed more gradually.

"Barring any major exogenous shocks, our base case is for the Fed to cut in June, and we expect a gradual cutting cycle thereafter given the current growth backdrop."

Given the eurozone is more susceptible to economic headwinds, "we think the ECB is more likely than the Fed to embark on sequential cuts given prevailing growth differentials."

U.S. Markets:

Futures for the S&P 500 and Nasdaq-100 edged up, though Dow industrials futures slipped, while Treasury yields were little-changed, stalling after signs of persistent inflation propelled 10-year yields to their biggest one-week rise since October.

Stocks to Watch

Alphabet saw its stock rise in premarket trade on a report from Bloomberg that Apple may license Google's Gemini artificial intelligence engine and use it in the iPhone.

Nvidia is set to hold its annual developers conference, with a keynote from CEO Jensen Huang due to start just as markets close. Nvidia shares rose 2% in early action.

Forex:

Wage rise demands by Japan's largest trade union group are enough to merit a potential rate hike and end to the yield curve control by the Bank of Japan, which would lift the yen, NatWest Markets said.

NatWest has a long position in the yen, betting that it will rise ahead of the BOJ's decision, due on Tuesday.

NatWest is mindful that a rate hike could be accompanied by a cautious statement, however, and plans to review its tactical yen positions through the BOJ decision.

MUFG said the Bank of Japan's meeting might not be a decisive turning point in boosting the yen even if the central bank ends negative interest rate policy and yield curve control.

"The BOJ would have to signal more confidence that policy needs to be tightened further to trigger a stronger yen."

MUFG also said the Federal Reserve is likely to leave interest rates on hold on Wednesday but there is a possibility of it downgrading its interest-rate forecasts to two cuts this year rather than three, which would boost the dollar.

This potential switch "poses the main upside risk for the dollar in the week ahead should it encourage the U.S. rate market to further scale back Fed rate cut expectations," MUFG said, noting that it doesn't expect the forecasts to change.

"It would take just two participants to change from three cuts to two for the median dot to move."

Bonds:

Eurozone government bond yields were marginally lower but a bearish tone is expected this week in anticipation of central bank decisions, guidance and a busy supply schedule, Commerzbank Research said.

The bearish flattening bias-where short-term rates rise faster than long-term rates-in Treasurys and Bunds is likely to prevail ahead of the Bank of Japan, Federal Reserve and Bank of England meetings, alongside several more G10 central bank decisions and the European Central Bank Watchers Conference, Commerzbank said.

Government bond issuance volume is expected at around EUR34 billion this week, up from EUR21 billion last week.

Bund yields were slightly higher, indicating a light selloff, but buyers are expected to emerge when the yield reaches 2.5%, Mizuho said.

"With 10-year Bund [yields] close to 2.50%, we expect some marginal dip-buyers to emerge as markets test those levels."

Morgan Stanley Research said investors in Treasurys discounted cooling inflation, and chose to focus on strong growth, adding it sees room for yields to correct lower.

Since mid-2023, inflation started cooling meaningfully, while growth stayed strong and the optics of the labor market looked good, Morgan Stanley said.

It suggests that 10-year yields could have been around 3.60% if markets had focused on supply-side gains and inflation progress.

Energy:

Oil prices continued to rise after hitting a four-month high last week, with investors turning their focus on a string of key central banks meetings this week.

Gains were boosted by a new wave of Ukrainian attacks against Russia, which sparked a fire at an oil refinery and disrupted some electricity supplies, as well as strong refining activity in some major Asian countries further buoying market optimism, according to ING.

European natural-gas prices traded higher on concerns over global supply disruptions but high storage levels limited gains.

"Two storms off the coast of northern Australia are likely to turn into cyclones, which has seen LNG export facilities such as Gorgon, Wheatstone and Prelude partially or fully close," ANZ Research said.

"Disruptions to U.S. supply are also emerging, with flows to the Corpus Christi LNG export terminal falling."

Yet, Europe's storage levels are still abundant and show no signs of shortage as the continent approaches the end of the winter season. According to industry group Gas Infrastructure Europe, EU storage is currently 59.67% full.

Metals:

Gold and base metals were lower in Europe as concerns weighed about the timing of interest rate cuts ahead of Wednesday's Fed meeting.

Swissquote Bank said the FOMC will enter the meeting having seen a two-month jump in inflation, healthy jobs data, above-average economic growth and robust corporate earnings, and there's a chance it will plot fewer rate cuts for the year as a result.

Uranium prices may have pulled back recently but Jefferies thinks fundamental drivers of the commodity remain positive.

Spot uranium prices have fallen some $24/lb since peaking at $107/lb on Feb. 5, reflecting low volumes being made available to buyers.

"Producers remain short pounds, financial buyers continue to underpin demand, and the longer-term demand outlook remains positive," Jefferies said.

"We anticipate a volatile market, but with a broader upward price trend."


EMEA HEADLINES

Logitech Shares Drop After CFO Departure

Logitech International shares plummeted after it said that its chief financial officer Charles 'Chuck' Boynton resigned to pursue another career opportunity.

The Swiss accessories maker said Monday that Boynton, who became Logitech CFO in 2023, will remain with the company through mid-May, while a successor will be named at a later date, the company said.


Bang & Olufsen Cuts Guidance on Sluggish European Markets, Slow China Recovery

Bang & Olufsen cut its full-year guidance as a sluggish recovery in key European markets and the lack of a significant recovery in the Chinese economy is denting sales.

The Danish consumer-electronics company said late Sunday that its revenue in the fiscal year to May 31 is now expected to fall by between 5% and 8%, having previously expected growth toward the lower end of a guidance range of 0% to 9%.


Ukraine's Victories Over Russia's Black Sea Fleet Reopen Vital Grain Corridor

SOKOLIVKA, Ukraine-Farmers like Oleksandr Kosenyuk in this central Ukrainian village are ramping up exports of grain thanks to a surprising military success that has subdued the Russian Black Sea Fleet hundreds of miles away.

Ukrainian naval drones have sunk a series of Russian warships, putting swaths of the Black Sea all but off limits to the Russian Navy and allowing Ukraine to increase grain exports close to prewar levels from its main ports in Odesa.


GLOBAL NEWS

China's Economy Has a New Problem: Its Job Market

SINGAPORE-China's economy has a new problem: Rising unemployment.

Joblessness in China rose for the third straight month, according to new data published Monday. At 5.3%, the official jobless rate is back to where it was in July after increases in December and January reversed almost half a year of steady progress.


The Fed's Challenge: Has It Hit the Brakes Hard Enough?

When the Federal Reserve began sharply raising interest rates two years ago, the prospect of mortgage rates hitting 7% terrified Dwight Sandlin, a home builder based in Birmingham, Ala. "I was scared to death. Scared. To. Death," he said.

He just booked his most profitable year ever.


Hannon's Take: ECB Targets June Cut. Will The Fed Be There?

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