MARKET WRAPS
Watch For:
EU industrial production; trading updates from Galp Energia, Ashmore Group
Opening Call:
European stock futures were muted at the start of the week, though U.K. futures were lower. Asian equities declined; the dollar and Treasury yields steadied; while oil futures fell and gold edged higher.
Equities:
European stock futures were muted early Monday, though U.K. futures fell, as traders awaited further developments in the Middle East following Iran's attack on Israel over the weekend.
Officials said most of the 300 drones and missiles Iran launched toward Israel on Saturday were intercepted, and tensions appeared to be de-escalating. President Joe Biden condemned the attack and said U.S. forces helped Israel take down nearly all of the incoming drones and missiles.
The attack could complicate the Federal Reserve's fight against inflation and its decision on the timing of any interest-rate cuts. "Our sense is that events in the Middle East will add to the reasons for the Fed to adopt a more cautious approach to rate cuts, but they won't prevent it from cutting altogether," Capital Economics said. "We expect the first move in September."
If an escalation of hostilities worsens in the Middle East, markets could see further falls, said Diana Mousina, AMP's deputy chief economist. She added that it's unlikely that there would be a more than 10% fall in equity markets. "I think you'd really need a change in the economic environment. For example, like a complete pricing out of interest rate cuts this year."
Forex:
Safe-haven currencies such as JPY and USD weakened slightly in likely position adjustments as traders monitor Middle East developments. Market response has been subdued in early Asia trade, but volatility and nervousness are likely, with focus on any further headlines coming out of the Middle East, Saxo Markets said.
Bonds:
Fixed-income investors can stick to long-duration bonds, as data keep U.S. interest rates at current levels or higher, Bank of America said. "We continue to believe that leaning long duration at or above current levels is justified by favorable risk/reward dynamics."
After Treasury yields rallied last week on hotter-than-expected inflation, the 10-year reached BofA's target of 4.55%. "New patterns and signals suggest a 1-2 week dip, a final rip to at least 4.70% and peak yield may be found by Memorial Day," BofA said.
Energy:
Oil futures shrugged off the latest escalation of tensions in the Middle East in early Monday trading.
A surge in oil prices is unlikely over the near term, given ample spare OPEC capacity and an already high geopolitical risk premium, ANZ said. The market has been on edge since October when the Hamas-Israel conflict first started, and possible Iranian involvement has long been a concern, ANZ noted.
As such, oil markets may have a muted reaction to the latest news of Iran's strike on Israel, with Tehran saying it considers the matter closed, ANZ said. Regardless, it is Israel's response that will determine whether the escalation ends or continues, ANZ said.
Metals:
Gold rose in Asia, extending gains after briefly touching a record high $2,431/oz on Friday on likely safe-haven buying.
Saxo said the precious metal has a major risk premium priced in already, having recently rallied strongly despite USD and bond yield strength. "With that in mind, the metal may struggle to regain last week's strong momentum before going through a long overdue consolidation,"
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Base metals jumped in Asia after the U.S. and U.K. said Friday that they will limit trading of Russian aluminum, copper and nickel on their metals exchanges.
Removing one of the biggest producers of base metals could lead to a surge in prices, but initial prospects of Russian metal produced before the ban flooding the market could offset these concerns, ANZ said.
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Iron ore prices advanced amid hopes for rising demand from China. The country's iron ore imports unexpectedly rose 5.5% on year in the first quarter due to robust domestic steel output, ANZ said. Steelmakers could be adjusting production to better align with demand, which could have boosted iron ore prices.
TODAY'S TOP HEADLINES
Biden Urges Caution as Israel Weighs Response to Iran
TEL AVIV-President Biden urged Israel to use caution in any response to Iran's unprecedented attack and pressed allies Sunday for a united diplomatic front in a bid to stop the hostilities from spiraling into open warfare that could engulf the Middle East and entangle the U.S.
The race to de-escalate tensions underscored the intense new phase that Iran and Israel's long-simmering conflict had entered after Tehran launched what military analysts said was one of the largest combined aerial attacks in recent history with more than 300 drones and missiles.
America's Bonds Are Getting Harder to Sell
A series of weak auctions for U.S. Treasurys are stoking investors' concerns that markets will struggle to absorb an incoming rush of government debt.
A selloff sparked by a hotter-than-expected inflation report intensified this past week after lackluster demand for a $39 billion sale of 10-year Treasurys. Investors also showed tepid interest in auctions for three-year and 30-year Treasurys.
'Envy of the World'-U.S. Economy Expected to Keep Powering Higher
It has been two years since forecasters felt this good about the economic outlook.
In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%.
CVC Set to Launch IPO, Seeks Valuation of Up to $16 Billion, Sources Say
Global buyout firm CVC Capital Partners is set to kick off a planned Amsterdam share sale Monday, targeting a valuation of up to $16 billion in the latest sign of a pickup in initial public offerings.
CVC is looking for a valuation of about 13 billion euros to EUR15 billion, people familiar with the matter said, or the equivalent of $13.8 billion to $16 billion. It aims to raise more than EUR1 billion by selling stock from existing shareholders and issuing new shares, assuming the offering is launched as planned, some of the people said.
$850 Millennium Falcons and $680 Titanics: Grown-Ups Are Now a Gold Mine for Lego
MANCHESTER, England-Lego has always been a toy for children, but try telling that to its legion of adult fans.
Grown-up builders, often rediscovering Lego after what aficionados refer to as the "dark age"-the void separating childhood fandom and its resumption as an adult-are increasingly helping cement the Danish company's status as the world's biggest toy maker by sales.
U.S., U.K. to Ban Exchanges From Dealing in Russian Metals
The U.S. and U.K. will limit trading of Russian aluminum, copper and nickel on their metals exchanges in a bid to deprive Moscow of a key source of revenue, a move coming despite concerns that rising commodity prices could fuel inflation.
The U.S. and U.K. on Friday announced they are tightening a clampdown on Russia's metals trade with the London Metal Exchange and the Chicago Mercantile Exchange, the world's leading metals exchanges, by no longer allowing trade in new aluminum, copper and nickel produced by Russia.
Powerful Senator Crafts TikTok Crackdown
WASHINGTON-Sen. Maria Cantwell said she wants to end China's control of TikTok. She also wants such legislation to hold up in court. But what that bill looks like, and how quickly it could get to President Biden's desk, remain in play, the powerful Democrat said in an interview.
The House overwhelmingly passed a measure last month that would force the short-video app to find a new owner that isn't a foreign adversary within six months or be banned in the U.S. That put the bill in the lap of Cantwell, the chair of the Senate Commerce Committee, who has a deep experience with technology issues but has also sparked frustration among colleagues for how she handled past efforts regarding user privacy and social media.
Inside Amazon's Push to Crack Trader Joe's-and Dominate Everything
When Amazon was working on a new private-label food brand called Wickedly Prime, members of the team pitched management this vision for the brand: to replicate the top 200 items sold at Trader Joe's, the grocery-store chain with a rabid fan following.
To help in its quest, the team recruited a senior manager from Trader Joe's snack-foods business. The recruit wasn't told specifically what she'd be working on when Amazon conducted her interview in 2015.
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Expected Major Events for Monday
05:00/FIN: Mar CPI
06:00/NOR: Mar External trade in goods
06:30/SWI: Mar Import Price Index
06:30/SWI: Mar PPI
07:00/TUR: Feb Employment / Unemployment
07:00/SVK: Mar CPI
07:00/SVK: Mar Core & net inflation development
08:00/POL: Mar CPI
08:00/POL: Feb Merchandise trade
08:00/BUL: Mar CPI
09:00/EU: Feb Industrial Production
15:59/UKR: Feb Trade
All times in GMT. Powered by Onclusive and Dow Jones.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
04-15-24 0018ET
