MARKET WRAPS
Watch For:
S&P manufacturing PMI; Construction Spending for December
Today's Top Headlines/Must Reads:
- New Disruptions, Geopolitics Hang Over 2024 Supply Chains
- Optimism Abounds on Wall Street This New Year
- Investors' Hope for 2024: A Return to Long-Lost Normalcy
Opening Call:
Stock futures struggled for traction on Tuesday after some soft data from China raised concerns about the health of the global economy.
Hong Kong's Hang Seng shed 1.5% and the Shanghai Composite dipped 0.4% after an official report over the weekend showed China's factory activity in December eased to its slowest pace in six months .
"The PMI figures indicate a slowdown in China's economic recovery in the last months of the year," SPI Asset management said.
"This development is expected to pressure fiscal and monetary policymakers to take urgent action, especially after leaders committed to maintaining a pro-growth stance in 2024," it added.
Adding to investor caution was heightened geopolitical angst as Iran said it would send a warship to the Red Sea after the U.S. navy sank some boats of the Tehran-backed Houthi militia.
Oil prices rose in response , and the move raised concerns that higher energy costs may again build inflationary pressures.
This may have contributed to a 6.4 basis point move higher in 10-year Treasury yields to 3.994% on Tuesday.
Interactive Investor said "the stage is set for further gains, certainly in terms of historical trends which suggest that the momentum could spill over into January." But it added that "the initial tests of investors' mettle will come thick and fast during the month."
These potential market catalysts include the nonfarm payrolls report for December, due this coming Friday, and the fourth quarter corporate earnings season, which starts in a couple of weeks time.
Premarket Movers
ASML fell 1.1% after the Dutch government blocked the company from exporting to China certain lithography systems , which are essential to making advanced microprocessors. WSJ reported the rule came after officials from the Netherlands, Japan, and the U.S. reached an agreement to start restricting such exports.
Coinbase Global was up 6.4%, MicroStrategy rose 9.2%, and Marathon Digital surged 14% as crypto-related stocks received a boost from Bitcoin's move above $45,000 for the first time in more than a year on expectations that approval of Bitcoin exchange-traded funds couldcome as soon as this week.
Tesla is expected by analysts on Tuesday to report fourth-quarter deliveries of between 475,000 and 480,000 units. The stock was up 0.9% premarket.
BYD reported fourth-quarter deliveries of about 526,000 all-electric vehicles, up from about 432,000 delivered in the third quarter of 2023. If Tesla meets expectations, BYD's numbers would make it the largest seller of all-battery electric vehicles on the planet.
U.S.-listed shares of fellow Chinese EV makers Li Auto, NIO, and XPeng traded lower after issuing deliveries numbers for December. Li Auto was down 4.1% even after reporting it delivered 50,353 vehicles in December, a jump of 137.1% from a year earlier. NIO declined 1.4% and XPeng dipped 0.4%.
Forex:
The dollar rose against a basket of currencies as the market awaits economic data releases this week for insight into the Fed's next move, XS.com said.
"It seems that the main driver for [the dollar for] 2024 is whether the markets will continue to price in Federal [Reserve] interest rate cuts or if the Fed has lost control and made a policy mistake."
Entering 2024, the dollar's weakness reflects mixed sentiments in the markets, balancing between expected shifts in Fed policy and global economic developments, XS.com added.
The inversion of the Treasury yield curve and the weakness of the dollar have likely gone too far in the near term, although this week's data releases are unlikely to prompt a reversal of this trend yet, Danske Bank Research said.
For now, the market will probably look for confirmation of the disinflationary trend to justify an inverted money-market curve and the weaker dollar, it said.
Treasury bill supply hitting the market from the end of January could prove the trigger for a reversal in front-end rates and EUR/USD.
Energy:
Oil prices moved sharply higher after attacks on ships in the Red Sea by rebel Houthi forces added to worries that the war in Gaza could spread further into the Middle East.
The U.S. destroyed three boats carrying militants supported by Iran on Sunday after a Maersk-owned container ship came under attack from Houthi forces late Saturday.
Maersk is still planning to ship via the Red Sea and Suez Canal in the near term, according to a company schedule released Monday.
Metals:
Base metals and gold prices rose, with a weaker dollar supporting commodities.
The dollar fell 2.1% last month, helping to lift commodity prices, according to Peak Trading Research. This trend is likely to continue depending on how the dollar moves, Peak said.
Markets will be looking to U.S. jobs data, with a series of releases lined up this week, it added.
"Bond markets are pricing a very dovish Fed this year, with the first interest-rate cut projected by March, and six more cuts penciled in by the end of 2024."
TODAY'S TOP HEADLINES
Americans Are Canceling More of Their Streaming Services
It's getting a lot harder for streaming services to hold on to their customers.
Crystal Revis, a mother of six in Lynn Haven, Fla., recently canceled her subscriptions to Disney+ and Paramount+, among others, because of their swelling price tags and the rising cost of living. She is also considering canceling Netflix, home to shows such as "The Crown" and films including "Leave the World Behind."
Wealthy Investors Rescued Juul From Bankruptcy. Others Are Crying Foul.
Two of Juul Labs' longtime directors-a Hyatt Hotels heir and a venture capitalist-helped bail out the e-cigarette maker when it was on the brink of insolvency.
It was a deal that preserved the equity investments of Nick Pritzker and Riaz Valani, cemented their influence over the company and secured them releases from liability in thousands of lawsuits against Juul. Now Juul is fighting a lawsuit from a group of investors alleging that those two directors were looking out for their own interests, not the company's.
Big Tech Braces for Wave of Antitrust Rulings in 2024
U.S. antitrust cases against tech giants Google and Meta Platforms are expected to come to a head in 2024, likely producing long-awaited rulings that could shape the legacies of top Biden administration regulators.
Silicon Valley and its critics have seen their patience tested on some of these cases. A U.S. antitrust case brought against Alphabet's Google unit in 2020 went to trial in 2023 and now heads to closing arguments in May.
Outlook for Chinese Equities May Remain Challenging in 2024
China's equity markets were the worst performers in the Asia-Pacific region for 2023, and the new year is likely to bring more of the same, as recovery for the economy and corporate earnings remains challenging due to the lingering property downturn and local government debt risks.
Investors are struggling to find conviction that the worst is over for China's economy amid the country's on-and-off recovery momentum following the pandemic.
Shale Is Keeping the World Awash With Oil as Conflicts Abound
A surprise surge in American oil and gas production and exports is helping to keep the world stocked, blunting the impact of widening conflict in the Middle East that has crimped key shipping lanes.
When Iranian-backed Houthi militants began launching missiles and drones at ships crossing the Red Sea near Yemen in October, many feared disruption to the vital shipping lane would drive up energy prices. But oil and gas prices this past month have sunk about 5% and 23%, respectively.
Republicans' Narrow Control of House Sets Up Barnburner in 2024
WASHINGTON-Both Republicans and Democrats see realistic paths on the November election map to win control of the House of Representatives next term, setting the stage for an intense campaign season in which a handful of close races are likely to tip the balance in the 435-seat chamber.
Republicans, who currently have a thin 220-213 majority, say that their tougher stance on crime and border security will steer voters toward conservative candidates in the House. Democrats are focused on winning seats they narrowly lost during the 2022 midterm election, when the party ceded its own small majority but gave up less ground than expected. Softening inflation and continued voter concern over abortion access could boost their prospects.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing scheduled
Economic Calendar (ET):
0930 Dec Canada Manufacturing PMI
N/A Day after New Year provincial holiday in Quebec
Stocks to Watch:
Aimia: Settlement Agreement Entered With Milkwood Capital
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Crown Capital Partners Announces Amendment to Credit Facility; Names Charles Frischer to Board; Announces Closing of Private Placement Offering of Units
Expected Major Events for Tuesday
00:01/UK: Dec Shop Price Index
08:45/ITA: Dec Italy Manufacturing PMI
08:50/FRA: Dec France Manufacturing PMI
08:55/GER: Dec Germany Manufacturing PMI
09:30/UK: Dec S&P Global UK Manufacturing PMI
14:30/CAN: Dec Canada Manufacturing PMI
14:45/US: Dec US Manufacturing PMI
15:00/US: Nov Construction Spending - Construction Put in Place
16:00/US: Dec Global Manufacturing PMI
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Tuesday
Anixa Biosciences Inc (ANIX) is expected to report for 4Q.
Cohbar Inc (CWBR) is expected to report for 3Q.
Kaspien Holdings Inc (KSPN) is expected to report for 3Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Cytosorbents Cut to Neutral From Buy by HC Wainwright & Co.
(MORE TO FOLLOW) Dow Jones Newswires
01-02-24 0612ET
