MARKET WRAPS
Watch For:
No major economic data expected; trading updates from Galp Energia, Lagardere, Smith & Nephew
Opening Call:
European stock futures were higher at the start of the week; Most Asian stock benchmarks are closed Monday for the Lunar New year holiday; the dollar edged lower; oil futures and gold also declined.
Equities:
European stock futures were tracking higher early Monday as investors prepare for this week's release of the first big U.S. inflation report of the year and digest more coming corporate earnings.
Technology stocks drove the S&P 500 past another milestone and to a fresh record on Friday, with the broad index closing above 5000 points for the first time.
"The main reason the market has gone higher over the past 15 weeks has been the Fed pivot, the idea that the Fed is done raising interest rates to being on pause or cutting them. I think that's a big catalyst for the rally that we have seen," said Chris Zaccarelli, chief investment officer at Independent Advisors Alliance.
Investors will get a fresh read on U.S. inflation when the latest consumer price data is published on Tuesday. Retail sales data is due Thursday and supplier prices will be gauged anew on Friday.
Randy Watsek, a New York financial adviser with Birch Lane Group of Raymond James, said that because of solid earnings growth, he is finding plenty of attractive stocks for long-term investors despite the run-up in share prices.
Forex:
The USD Index may trade sideways this week, said NAB's FX Strategy Team.
Focus is likely to be on core U.S. CPI due out this week, where the data will probably be a swing factor for "moving the dial" on market pricing of Fed rate cuts in May and beyond, the team said.
Bonds:
There was no trading in Treasurys amid a holiday in Japan.
Focus is on the CPI report for January due Tuesday, said U.S. economist Michael Reid of RBC Capital Markets.
"Our forecast calls for a [month-over-month] rise of 0.2% in headline and 0.3% in core," Reid said.
While the progress in core on a [year-over-year] basis is sluggish, a monthly 0.3% print is consistent with the 'more good data' that the Fed wants to see, he said.
Energy:
Oil futures declined in Asia, coming off weekly highs on Friday in a possible technical adjustment.
Oil prices could see an upside amid the continuing Middle East tensions.
Meanwhile, the market focus will also be on OPEC's monthly oil market report due on Tuesday, and the IEA's report on Thursday.
Brent's moves back above the $80-per-barrel level could trigger "a bit of nervousness about inflationary pressures," a team of Deutsche Bank strategists led by Jim Reid said.
Metals:
Gold was lower ieary Monday amid subdued trading during the Lunar New Year holiday.
With key markets including Japan and China closed, trading is likely to be thin.
Investors will likely wait for U.S. CPI data due Tuesday to get further clues on the Fed's rate path.
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Copper was trading in a sideways range following the fall in prices on Friday.
The Lunar New Year holidays in China seemed to have dragged on investor sentiment, as did rising inventory, said Westpac analysts in a commentary.
As markets in other key Asian countries such as Japan are also closed, trading is likely to remain subdued.
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Deflationary pressures and thin steelmaking profits in China are likely to hold back any Chinese "tidal wave of steel scrap," which has so far been elusive, Morgan Stanley analysts reckon.
They note Chinese scrap use being at its lowest in six years and said they are "increasingly cautious over China's ability to rapidly grow its obsolete scrap volumes."
Iron ore would benefit from this, they said, as forecasters have long tipped rising scrap availability would erode demand for the raw material.
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02-12-24 0015ET
