MARKET WRAPS
Stocks:
European shares were higher on Friday as luxury-goods stocks advanced after better-than-expected results from LVMH.
LVMH 's results are likely to tame investor concerns regarding the luxury outlook, given mixed signals from smaller players in recent weeks, Citi said.
Spirits companies also rose as investors reacted positively to outlook comments by Remy Cointreau .
London stocks rose on improved sentiment following above-forecast consumer confidence data. U.K. GfK consumer confidence advanced to minus 19 in January from minus 22 previously.
Economic Insight
The European Central Bank's press conference on Thursday confirmed that investors should shift their attention toward June for the first interest rate cut , leaving market pricing of monetary easing before that too early, Lazard said.
"Despite Lagarde's clarity, markets continue to price over an 80% chance of a 25bps rate cut in April which I view as a case of unwarranted optimism."
U.S. Markets:
Stock futures declined as a tepid sales outlook from Intel had traders pushing equities lower ahead of the release of the Federal Reserve's favorite inflation measure, the personal consumption expenditures price index.
Excluding food and energy, the index is expected to have risen 0.2% from November.
Stocks to Watch
Microsoft surpassed the $3 trillion market cap level on Thursday for the first time on a closing basis. The stock was down 0.7% premarket.
Tesla fell 12% on Thursday, the largest percent decrease since Jan. 3, 2023, after it warned of slowing growth in 2024. Tesla was rising 0.3% premarket.
Forex:
Further declines in the euro following Thursday's fall could be limited as U.S. PCE data could curtail the upside move in the dollar index and throw a floor under the weakness of EUR/USD around the 200-day moving average, Swissquote Bank said.
UniCredit Research said the EUR/USD currency pair remained sluggish as investors still anticipated substantial easing by the ECB this year.
"A bearish picture seems to remain of reference for this pair in the near term, given its difficulty holding and exceeding 1.09," it said.
Charts signaled that the risk of test of 1.0750/1.07 for EUR is concrete if the 1.08 baseline is also breached, but a further decline in the U.S. PCE core deflator for December might still offer the common currency a cushion on Friday, UniCredit said.
Bonds:
Eventual monetary policy easing by the ECB, subject to further slowdown in inflation, is expected to support the bond market , Candriam said.
"If the disinflation process continues, the ECB will be able to loosen its monetary policy and provide further support for bond markets around June at the earliest."
Columbia Threadneedle Investments confirmed overweight in European government bonds , favoring them over U.K. gilts, following the ECB meeting.
"The evolving underlying inflation trend and some independent wage trackers were allowing members of the committee to gain greater confidence that current stance is having the desired effect, opening the door to a policy shift perhaps sooner than expected," Columbia Threadneedle said.
Societe Generale Research recommends investors switch tactically neutral on German Bunds ahead of inflation data, which is due on Jan. 31. It continues to believe that 10-year German Bund yields closer to 2.50%/2.60% should be targeted as a buy on dip, they say in a note.
Energy:
Oil prices edged lower after settling at their highest level since late November in the previous session.
Oanda said WTI crude oil faces rising risks of a potential minor pullback, based on technical charts.
WTI oil's gains since the beginning of this week have lifted the hourly relative strength index's momentum indicator to close to an extremely overbought level, it added.
WTI oil has also risen to near the key medium-term resistance area of $78.00/bbl-$78.40/bbl, it said.
Hence, odds have increased for a possible minor pullback to retrace part of an ongoing short-term uptrend phase, with the next intermediate support levels at $75.75/bbl, $75.30/bbl and $74.80/bbl, Oanda said.
Metals:
Base metals were mixed while gold traded slightly higher on solid economic data from the U.S. and China ramping up stimulus to prop up growth.
"The Chinese central bank's plans to cut RRR [reserve ratio requirements] and Beijing's stabilization measures which sparked a rally across the base metals and iron ore complex this week," Citi said.
It raised its three-month copper-price forecast to $8,800 a ton, citing tightness in the market.
EMEA HEADLINES
German Consumers Feel the Chill as Inflation Keeps Biting
Germany's consumer confidence looks set to slump in February as shoppers save rather than spend amid a wintry economic landscape.
A forward-looking consumer-sentiment index set out Friday forecasts confidence to plunge sharply to minus 29.7 in February from minus 25.4 this month. The index, published by research group GfK and the Nuremberg Institute for Market Decisions, comes in well below economists' expectations for a slight uptick to minus 24.5, according to a poll compiled by The Wall Street Journal.
Lonza Sees Flat Sales in 2024
Lonza Group said it expects sales growth to be flat in 2024, after it reported sharply lower earnings despite higher revenue for last year due to continued investments.
The Swiss life-sciences company said Friday that it anticipates sales at constant exchange rates to be flat this year compared with 2023, and a core earnings before interest, taxes, depreciation and amortization margin in the high twenties range.
Volvo Lifts Dividend After Earnings Rise; Cautions on Normalizing Truck Demand
Volvo increased its dividend after posting an 82% rise in fourth-quarter earnings, but cautioned that truck demand is normalizing while construction equipment demand is weakening in most markets.
The Swedish truck maker said Friday that truck deliveries rose 4.4% in the quarter but order intake fell 8.8%, amid a continuing normalization of demand that reflects somewhat lower transport volumes and a weaker macroeconomy.
GLOBAL NEWS
What to Watch in Friday's Spending Report: A Last Look at Inflation Before the Fed Meeting
Prices ticked up slightly in December, economists estimate, but the longer-run trend shows inflation cooling while consumers spent strongly and incomes grew-all ingredients of a soft landing for the economy.
Berkshire, Hedge Funds Plow Into Liberty's Sirius Tracking Stock; Too Good to Be True?
The trade seems too easy to resist.
It has attracted a slew of notable hedge funds including Baupost Group, Millennium Management and Point72. Berkshire Hathaway is the largest participant and it added to its holding during January.
Biden Pauses Approvals for LNG Exports
The Biden administration effectively froze the approval process for new plants to export U.S. liquefied natural gas, bowing to demands from environmental groups and angering oil-and-gas companies.
President Biden said Friday the administration will pause export application reviews as it takes stock of the country's newfound status as the world's largest LNG exporter.
Biden Campaign Contends With New Challenge: Hecklers From His Own Side
Activists opposing Israel's military offensive in Gaza interrupted President Biden during a rally Wednesday with auto workers, a day after they heckled him at a campaign speech-back-to-back outbursts that represent the loudest protest movement Biden has faced since taking office.
Demonstrators also disrupted a speech he gave earlier this month in a South Carolina church, yelled as he addressed auto workers in Illinois and confronted him at fundraisers in Washington and Minnesota. They also are stationing themselves outside nearly all of his public events when he travels around the country.
U.K. to Pause Trade-Treaty Talks With Canada
OTTAWA-The U.K. said on Thursday it would pause negotiations with Canada on a comprehensive liberalized-trade treaty, citing a lack of progress. Canada said talks stalled over agriculture, and British reluctance to increase market access for the Canadian agrifood sector.
"We reserve the right to pause negotiations with any country if progress is not being made," according to a statement from the U.K. government, published on the social-media platform X, formerly known as Twitter, by the High Commissioner to Canada. The statement added that the U.K. would be willing to restart talks with Canada, so long as it benefits businesses and consumers "on both sides of the Atlantic."
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-26-24 0556ET
