MARKET WRAPS

European stocks fell on Monday, as trader focus turned to the U.S. inflation print on Tuesday and what it means for the prospect of the Federal Reserve beginning to cut interest rates.

Stocks to Watch

Porsche 's fully-electric Macan model gives investors reason for optimism, Deutsche Bank said. The Macan will drive growth in the coming years and could generate around EUR1.3 billion by 2026, or about a fifth of the group's earnings.

Marks & Spencer 's share price sharply rose last year and the recent correction, reflecting some repositioning and profit taking along with concerns over the consumer and costs outlook, provides a more attractive opportunity to investors, RBC said, upgrading the stock to outperform from sector perform.

U.S. Markets:

Stock futures were falling as attention was on Tuesday's inflation data.

The data are expected to show inflation remains high enough to suggest interest-rate cuts aren't imminent, ING said.

Annual CPI is forecast at 3.1% in February, according to the consensus in a WSJ poll.

Stocks to Watch

Coinbase rose 6% premarket, as bitcoin notched another record high, trading above $71,000.

New York Community Bancorp rose 2% premarket after closing down over 6% Friday.

Forex:

Sterling's recent strong momentum faces a key challenge Tuesday when U.K. employment data are released, ING said.

"Wage growth figures, especially in the private sector, will be watched very closely as they now represent the second most important input for the Bank of England after services inflation."

Unless U.K. data are stronger than expected, EUR/GBP is unlikely to decline much further after falling sharply Friday, ING added.

U.S. inflation data on Tuesday could halt the dollar's recent falls, ING said.

The dollar started the week steady after a steep decline on Friday following the U.S. jobs data. "We expect inflation figures to put a stop to the dollar decline this week."

Morgan Stanley Research recommended investors adopt tactical short positions in EUR/CHF ahead of the Swiss National Bank's monetary policy meeting on March 21, as it expects market pricing and positioning to support the Swiss franc.

Bonds:

German 10-year Bund yields were trading in line with Morgan Stanley Research's fair value estimate of 2.26% for March.

Morgan Stanley analysts estimated an approximately 20 basis point cheapness in 10-year Bunds the week before last week and this cheapness has now been fully corrected.

Portuguese government bonds moved in line with German Bunds early Monday after Sunday's parliamentary election showing the country shifting to the right.

Energy:

Oil prices hovered in early trade on concerns over slowing demand in China and uncertainties around the timing of U.S. interest-rate cuts.

Chinese consumer prices rose modestly in February, supported by a temporary holiday spending boost, but the producer-price index fell for the 17th month in a row.

All eyes are now on U.S. CPI data due on Tuesday for signals on the path of rate cuts. Meanwhile, monthly reports from OPEC and the IEA later this week are expected to offer clues on the oil demand outlook.

Metals:

Metal prices rose, with gold climbing again on a fall in U.S. yields.

Friday's hotter-than-expected U.S. nonfarm jobs data was offset by a rise in unemployment and slower growth in wages than expected, giving peace of mind to gold investors as the dollar tumbled in response, Swissquote Bank said.

There's no upper limit when people want to buy gold and it could hit even higher figures-adjusting for inflation it remains below peaks seen in 2020, 2011 and 1980-though any retreat in Fed rate-cute expectations could cool short-term price surges, it said.

Lithium is getting closer to finding a floor as supply cuts pick up, Morgan Stanley said, continuing to expect an oversupply in 2024, but a smaller one than it previously envisaged.

After a challenging 2023 for the metals industry , Jefferies "believe we are at the foothills of the next commodity cycle."

It said that there is early evidence of a recovery in global manufacturing PMIs and reckon a rally in copper, in particular, could happen sooner than envisaged, partly due to the resilience of the U.S. economy.


EMEA HEADLINES

Saudi Aramco Hikes Dividend, Adjusts Spending

Saudi Arabia's national oil company hiked dividend payouts for last year after it achieved its second-highest ever net profit and said investment plans to 2028 would be reduced by an abandoned plan to boost production.

Saudi Arabian Oil Co., known as Aramco, said Sunday that it made $121.3 billion in net profit last year, compared with $161.1 billion in 2022, when oil prices swelled the company's coffers to a new record. Aramco attributed the fall to lower crude-oil prices and volumes sold, but said last year's net profit was its second-highest ever.


Fed and ECB Tee Up June Interest Rate Cuts. What Happens After That.

Whisper it, but the path to lower interest rates is finally taking a clear shape on both sides of the Atlantic.

Federal Reserve Chairman Jerome Powell spent the week telling Congress that interest rates will come as soon as there's enough evidence that inflation is under control. The strength of the economy, of which the better-than-expected jobs report Friday is just the latest surprise, is of secondary importance.


Two Canals, Two Big Problems-One Global Shipping Mess

More than 50 ships queued to cross the Panama Canal on a recent day-from tankers hauling propane to cargo ships packed with food. A prolonged drought has led the canal's operator to cut the number of crossings, resulting in longer waits. The tolls that ships pay are now around eight times more expensive than normal.

Over 7,000 miles away, vessels that move containers through Egypt's Suez Canal are waiting for naval escorts or avoiding the passage altogether to take a much longer voyage around South Africa. Ship operators fear that their crews could be imperiled on the journeys through the Red Sea by missile or drone attacks from a Yemen-based rebel group.


GLOBAL NEWS

It Isn't Just Big Tech Propelling Gains in the Stock Market Anymore

Strong U.S. growth is prompting investors to scoop up a broader set of stocks, rather than just the handful of giant technology companies that drove indexes to record heights.

With heavyweights including Apple and Tesla sinking this year, a larger group of companies has helped power recent gains. The equal-weighted S&P 500, which measures each company equally rather than by its market capitalization, rose to a record this past week. Almost one-fifth of the stocks in the index hit new 52-week highs on a recent day, the largest share since May 2021, according to research by Bespoke Investment Group.


Japan's Economy Expanded in Fourth Quarter on Capital Spending Boost

TOKYO-Japan's October-December gross domestic product was raised to show a modest growth thanks to stronger-than-initially-estimated capital spending, revised government data showed Monday.

The Japanese economy expanded 0.4% on an annualized basis in the final quarter of 2023, compared with the 0.4% contraction recorded in the preliminary estimate released in mid-February. It grew 0.1% from the previous quarter.


China's Property Bubble Popped. These Cities Are Taking the Brunt.

There are many things haunting China's economy these days, foremost among them the property market, which is a deflating bubble draining wealth from all corners of the country.

Housing prices and sales are falling, and with them the investments of Chinese, who are notorious savers who put most of their excess cash into property.


Russia Is Pumping Out Weapons-but Can It Keep It Up?

Russia's ability to churn out tanks, missiles and shells has surprised the West and heaped further pressure on Ukraine. The question now is how long it can continue.

For some Western officials and analysts, Russia's military production figures are misleading and mask challenges including a shortage of labor and a falloff in quality. The ramp-up may not be sustainable as it saps resources from the wider economy, and any drop in output could leave Russia even more reliant on help from allies such as China, Iran and North Korea, they add.


Special Counsel Aims to Turn Down Heat on Biden Report. Congress May Have Other Ideas.

WASHINGTON-Robert Hur will arrive on Capitol Hill this week intent on turning down the political temperature surrounding his report on President Biden's mishandling of classified documents, according to people familiar with his preparations.

That won't be easy.


Bid to Pause Israel-Hamas War Falters Before Ramadan Starts

TEL AVIV-Tensions deepened over the weekend between President Biden and Israeli Prime Minister Benjamin Netanyahu as hopes of striking a deal to pause fighting before the start of Ramadan crumbled and a U.S. military ship set sail to ease the flow of aid into Gaza.

Biden warned on Saturday that an Israeli attack on the southern Gaza city of Rafah would cross a "red line" if it caused extensive civilian casualties. He added that Netanyahu is "hurting Israel more than helping Israel."


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This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

03-11-24 0655ET