MARKET WRAPS
Stocks:
European stocks were mostly lower on Thursday as optimism over rate cuts from the Federal Reserve was dampened by comments from Jerome Powell.
Powell said he didn't think it would be appropriate to lower the target range until more certainty emerged.
"We think the emphasis in the statement on the need for 'greater confidence' that inflation was heading 'sustainably' to target combined with his comment that there was a 'healthy disparity of views' means that the FOMC has not achieved the consensus it seeks," Standard Chartered said.
Focus now turns to the Bank of England's rate announcement at 1200 GMT, where it too could push back against expectations for rate cuts in the coming months.
London's FTSE 100 rose in early trade, as Shell gained after fourth-quarter results beat forecasts and it announced a $3.5 billion share-buyback scheme.
More Shares on the Move
BNP Paribas shares dropped after the company cut its 2025 profitability target after fourth-quarter net profit fell on higher costs and missed expectations.
Volvo Car will stop funding Polestar and could distribute its stake in the company to shareholders, as it moves to separate itself from the struggling electric-car maker and focus resources on its own development. Shares were up 22%.
U.S. Markets:
Stock futures pointed modestly higher, a day after equities tumbled following comments from Jerome Powell that an interest-rate cut in March was unlikely.
Stocks to Watch
Tech giants Apple, Amazon.com, and Meta Platforms are scheduled to report quarterly earnings after the closing bell. Apple rose 0.8%, Amazon was up 1%, and Meta gained 0.8%.
Forex:
Sterling fell against a broadly stronger dollar and traded steady against the euro.
"It is likely too soon for the BOE to send a strong signal that the first cut will be delivered in May," leading to potential modest gains for the pound, MUFG said.
The BOE should be more confident that rates have peaked, however, with updated forecasts likely showing near-term inflation significantly lower while those policymakers who previously voted to raise rates are likely to drop that vote, it said.
Bonds:
U.K. gilt yields and eurozone government bond yields edged higher, tracking Treasury yields after the Fed signalled March was likely too early for a rate cut, and as focus now turns to the BOE.
Energy:
Oil prices have bounced as Middle Eastern supply concerns persisted and Red Sea military action heats up.
That said, any gains were still being tempered by caution ahead of the next OPEC+ meeting, a strong dollar after the Fed said it wouldn't race to cut rates, and weak economic data from China, analysts said.
"Middle East tensions and disruptions in the Red Sea appear to be among the driving factors here but there is also the fact that countries continue to resiliently cope with high interest rates, which may soon fall," Oanda said.
Metals:
Base metals prices were mixed, while gold was lower, under pressure from a rise in the dollar after the Fed downplayed the chances of interest-rate cuts any time soon.
Prices of most industrial metals have also continued to take a downbeat turn following weak China data and supply concerns, analysts say.
Capital Economics said global lithium demand could roughly double by 2025 versus 2022 levels, outpacing supply increases and driving up prices, predicting lithium carbonate will increase from roughly $14 a kilogram now to $20 a kilo in 2024 and $30 a kilo in 2025.
"We suspect that prices are now close to their trough and expect some recovery in 2024-25," it said, adding: "We are at the high end of forecasts for lithium prices, probably reflecting our caution on supply."
EMEA HEADLINES
Glencore 2023 Production Volumes in Line With Guidance
Glencore said its full-year production fell across most metals and minerals but was in line with its revised guidance, while coal and gold output increased, reaching annual targets after stronger second half volumes.
The world's biggest miner by revenue said Thursday its full-year copper output fell 5% to 1.01 million metric tons in 2023 compared with the prior-year, due to the disposal of a copper mine.
Deutsche Bank to Cut About 3,500 Jobs
Deutsche Bank plans to cut about 3,500 jobs in a bid to reduce costs after it reported a drop in profit due to higher expenses.
The German bank-which employs about 89,000 people, according to FactSet-said Thursday that the job reductions are aimed at helping it deliver the remaining 1.6 billion euros-equivalent to $1.73 billion-of savings needed to hit the EUR2.5 billion target it had set for its efficiency program. Around EUR900 million in savings have been achieved to date, it said.
Roche Expects Sales, Core Earnings Growth
Roche Holding expects growth in sales and core earnings to pick up this year after waning demand for Covid-19 products and currency headwinds weighed on its top and bottom lines last year.
The Swiss pharmaceutical giant said Thursday that it expects sales growth in the mid single digit percentage range at constant exchange rates in 2024, with core earnings per share performing in line with sales when excluding the impact from tax disputes in 2023.
GLOBAL NEWS
What's the Right Interest Rate for the Fed Anyway?
The Federal Reserve is likely to start lowering its target range on interest rates sometime in the next several months. Just how much lower rates should go is where things get tricky.
Models that the Fed keeps an eye on suggest rates should already be lower than they are now. But the economy might not be running to model, and the sharp drops in Treasury yields and other long-term interest rates since last fall add further complexities.
Beijing Pledges More Fiscal Support as Economy Stumbles
China's finance ministry promised more proactive government spending this year, as Beijing doubles down on boosting the economy amid a deepening property slump, while wary economists say bolder moves are needed to rejuvenate growth.
Fiscal expenditure in 2024 will be maintained at the necessary intensity and fiscal transfers to local governments will remain at certain levels, officials from the Ministry of Finance said at a press conference on Thursday, signaling more financial support from Beijing to local governments struggling with piling debt.
Powell Navigates 'Toxic' Politics of Rate Cuts as Election Nears
For Federal Reserve Chair Jerome Powell, deciding when to cut interest rates is hard enough: Too soon, and inflation could rise again. Too late, and unemployment might shoot higher.
The challenge is doubly difficult this year because he is doing it in the glare of election-year politics.
Aviation Industry to Tackle GPS Security Concerns
Aviation companies and European regulators say they will increase documentation and alert procedures about GPS tampering after a recent uptick in incidents near war zones.
Commercial airlines raised concerns after an increase in so-called GPS jamming, when geopositioning signals are blocked so a flight location isn't shown, and spoofing, when a GPS shows a false location, in particular in the Middle East and around Ukraine and Russia.
Donald Trump's Wealth Under Siege From Civil Lawsuits
Donald Trump has strategically sought to leverage his courtroom appearances for fundraising and to rally his base, but civil litigation against the former president is casting an increasingly dark cloud over his finances.
A pair of civil cases in New York-one accusing Trump of smearing an ex-advice columnist and the other of exaggerating his wealth to lenders-could end up costing Trump and his family real-estate conglomerate as much as half a billion dollars and complicate his affairs as he seeks the presidency.
Europe Warns Hungary to Back Ukraine Aid or Face Consequences
BRUSSELS-European Union leaders are threatening to punish Hungary if it blocks a $54 billion aid package for Ukraine this week, a sign of growing anxiety across the continent about the dangers of a Russian victory in Ukraine.
The bloc's leaders are set to return to Brussels on Wednesday evening and will seek to agree Thursday on the 50 billion euro package that would provide to Kyiv critical budget support in paying for basic services over the next four years. Without EU approval, Ukraine could start running out of funds to cover salaries and pensions as early as the coming weeks, just as its military forces have been pushed onto the defensive by Russia.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
02-01-24 0609ET
