MARKET WRAPS
Stocks:
European shares were mostly higher on Thursday as investors weighed a heavy slate of earnings, although gains were capped as more hawkish comments from Federal Reserve officials continued to dominate the headlines.
"But knowing that the Fed is done hiking its rates and the expectation that the next move from the Fed will be a rate cut is enough to keep the market in a sweet spot," Swissquote Bank said.
"A delay in the timing of the first rate cut is even perceived as a good thing: the U.S. economy is doing so well that there is no urge to cut the rates right away."
There were a number of big share movers in Europe as traders reacted to some very mixed corporate earnings. They included Maersk, AstraZeneca, BAT and Unilever.
Shares in Maersk were on course for one of their biggest daily declines in recent years, after the shipping giant suspended its share buyback program. The move helps Maersk preserve cash as it contends with disruption in the Red Sea and overcapacity that is weighing on freight rates.
Economic Insight
The EU's economic governance focus is shifting to fiscal discipline , notably with the re-introduction of fiscal rules, as the macroeconomic environment normalizes in the wake of the pandemic and energy-price shocks, S&P said.
Government debt reduction will differ greatly among EU member states due to large differences in prepandemic debt levels, variations in subsequent debt increases, and different policy ambitions, S&P added.
U.S. Markets:
Stock futures hovered after each of the three main indexes closed higher on Wednesday, with the S&P 500 moving closer to eclipsing the 5,000 mark, while benchmark bond yields rose above 4.12%.
Results are due from Philip Morris and ConocoPhillips among other big companies early in the U.S. day.
Forex:
Dollar strength has waned somewhat this week in the absence of new data, yet the euro is failing to rise much as a result, Commerzbank Research said.
The euro edged higher against the U.S. currency but this is "almost entirely attributable to the dollar side" rather than to independent strength in the euro which continues to struggle, Commerzbank said. "The euro is having a hard time at the moment."
Deutsche Bank Research said the two-month correlation of EUR/USD with money markets' pricing of the likelihood of a Fed rate cut in May is a notable 90%, which is fractionally above the probability for March.
"We would expect this gap to grow as the market puts more weight on the May expectation."
Were May to end with no Fed rate cut, EUR/USD would trade with a 1.05 handle, while, in contrast, because a Fed rate cut in May is still 90% priced, a 25 basis point cut that month would presumably not imply much increase in EUR/USD from current levels, Deutsche Bank said.
Bonds:
Bunds are looking for direction, according Commerzbank Research, .against a backdrop of the absence of any larger flight-to-quality spillovers from the U.S. regional bank concerns, little macro impetus and slowing bond supply.
"In the absence of new bank jitters, the consolidation at the short-end could extend, while 10-year Bunds look set to remain better supported with 10-year yields at the cyclical high above 2.30%."
Energy:
Oil prices rose on a weaker dollar and improved sentiment on the demand side following a larger-than-expected drawdown in U.S. fuel stocks.
Meanwhile, Middle East tensions continued to keep traders on edge after Benjamin Netanyahu rejected Hamas's proposed deal for a ceasefire in Gaza.
Metals:
Base metals were firmer, with gold narrowly down on pressure from the elevated dollar and yields.
Fed officials are expected to reiterate their higher-for-longer narrative, keeping the dollar and the 10-year yield at current levels, and leaving persistent pressure on gold as a safe-haven metal. This offsets any potential gains from Middle Eastern tensions.
EMEA HEADLINES
Siemens Profit Beats Expectations, Boosted by Industrial Businesses
Siemens reported an increase in net profit, beating analysts' expectations, after earnings rose across most of its businesses in the first quarter of fiscal 2024.
The German industrial company said Thursday that it made 2.39 billion euros ($2.57 billion) in net profit for the quarter ended in December compared with EUR1.48 billion a year prior on revenue that grew 1.9% to EUR18.41 billion.
Unilever Net Profit Falls as Sales Miss Expectations, Launches Share Buyback
Unilever reported a better-than-feared net profit drop for 2023, following a turnover drop in the fourth quarter, and launched a share buyback.
The Anglo-Dutch retailer-which owns consumer brands such as Ben & Jerry's ice cream and Dove soap-on Thursday posted a net profit of 6.49 billion euros ($6.99 billion) for the year compared with EUR7.64 billion for 2022 and a consensus of EUR6.23 billion, taken from FactSet and based on 11 analysts' estimates.
Société Générale's Fourth-Quarter Profit Dropped on Lower Net Banking Income
Société Générale reported sharply lower net profit for the fourth quarter, weighed by lower net banking income and higher operating expenses.
The French lender on Thursday said its quarterly net profit was 430 million euros ($463.3 million), compared with EUR1.07 billion in the year-ago period.
Publicis Expects Slower Organic Revenue Growth in 2024
Publicis Groupe expects organic revenue growth to slow down this year due to an uncertain economic context, but its outlook exceeded analysts' forecasts.
The French advertising group on Thursday projected organic revenue growth of between 4% and 5% for 2024, slowing from the 6.3% growth rate it achieved last year. Analysts expected Publicis's 2024 organic revenue growth at 3.7%, according to consensus estimates provided by Visible Alpha.
Kering Expects Investments, Slowing Sales Growth to Hit Profitability in 2024
Gucci owner Kering expects investments in its fashion houses and a normalization of sales growth across the luxury sector to weigh on its profitability this year.
The French luxury giant on Thursday reported fourth-quarter sales of 4.97 billion euros ($5.35 billion), against expectations of EUR4.91 billion, according to consensus estimates provided by Visible Alpha. Gucci sales fell 8% in reported terms to EUR2.53 billion in the final quarter.
British American Tobacco Swings to Pretax Loss on U.S. Cigarette Write-Down
British American Tobacco said it swung to a pretax loss, driven by a previously reported write-down of its U.S. cigarette brands, but backed forecasts for growth in 2024.
The FTSE 100 cigarette maker-which houses the Kent, Dunhill and Lucky Strike brands-said pretax loss for 2023 was 17.06 billion pounds ($21.54 billion) compared with a profit of GBP9.32 billion a year prior. It said the swing was largely driven by an impairment of GBP27.6 billion. Of the impairment, GBP27.3 billion relates to pressure on some of its traditional cigarette brands in the U.S., as it shifts focus to smokeless products, it said.
AstraZeneca Shares Drop After Weak Quarterly Print Despite 2024 Growth Guidance
AstraZeneca sees its revenue and core earnings per share growing by double-digit percentages in 2024, the pharmaceuticals major said as it reported fourth-quarter core earnings per share below expectations on higher costs, sending the stock lower.
The Anglo-Swedish group on Thursday reported core EPS-its preferred metric which strips out exceptional and other one-off items-of $1.45 for the three months ended Dec. 31, up from $1.38 for the comparable period a year earlier, but short of estimates of $1.50 taken from a company-compiled consensus. The result was weighed down by higher research and development costs as well as selling, general, and administrative expenses-namely on investment in the upcoming launches of drugs Airsupra, Wainua and Truqap-though a lower tax rate helped to offset some of the earnings hit.
ArcelorMittal Swings to Net Loss on Disposal Impact, One-Off Charge
ArcelorMittal booked a swing to fourth-quarter net loss due to the impact from the disposal of its Kazakh operations and a large impairment charge, but said it sees improving steel demand.
The Luxembourg-based steelmaker on Thursday booked a fourth-quarter net loss of $2.97 billion, a swing from $261 million in net profit in the prior-year's same quarter, and compared with a consensus forecast of a $1.645 billion net loss.
Credit Agricole Net Profit Beats Forecasts; Lifts Dividend
Credit Agricole posted a better-than-expected fourth-quarter net profit on revenue growth in all business lines except insurance, and hiked its total dividend for 2023.
France's second-largest listed lender said Thursday that its net profit for the quarter was 1.33 billion euros ($1.43 billion) compared with EUR1.56 billion a year before as corporate and retail banking offset revenue decline at its insurance business due to weather-related claims.
Aker Solutions Raises Dividend and Launches Buyback
Aker Solutions on Thursday raised its dividend and launched a share-buyback program, with the company expecting to see increased market activity and continued high demand.
The energy-industry service provider reported a net profit of 9.87 billion Norwegian kroner ($932.8 million) for the fourth quarter, as earnings were boosted by the recent closing of a subsea joint venture, which saw it receive $700 million and retain a 20% ownership in a larger subsea entity. Revenue rose 32% to NOK10.87 billion.
GLOBAL NEWS
In China, Deflation Tightens Its Grip
SINGAPORE-China's deflation problem is getting worse, a stark symptom of a deepening economic malaise that spells trouble for the global economy.
(MORE TO FOLLOW) Dow Jones Newswires
02-08-24 0521ET
