MARKET WRAPS
Watch For:
Germany CPI; trading updates from Hermes, Saab
Opening Call:
European stock futures were mixed early Friday. Asian benchmarks were largely higher in holiday-thinned trading; the dollar and Treasury yields were little changed; while oil futures edged lower and gold futures steadied.
Equities:
Stock futures traded mixed early Friday. Asian trading was subdued ahead of the Lunar New Year holidays, with some markets including Hong Kong and Singapore closing early Friday, while others like China and South Korea were shut.
U.S. stocks closed higher Thursday, with two out of three benchmarks carving out fresh records, while the S&P 500 briefly eclipsed the 5000-point milestone for the first time ever, just before close.
"It looks like investors are determined to pass this 5,000 level, in spite of the fact of higher yields since this morning," said Peter Cardillo, chief market economist at Spartan Capital Securities. "It's the consistency of good earnings that are pushing the market higher."
On the docket for today are Germany CPI data and revisions to U.S. inflation data; the latter will be watched for in case of changes that could influence the Fed's rate outlook.
Forex:
The dollar steadied early Friday. Market pricing for a Fed rate reduction in March has been trimmed to negligible levels and there seems to be latent upside fuel for USD in pricing for FOMC meetings beyond March, Westpac said.
The U.S. economy's resilience could extend well into 2024, thanks to factors including lingering untapped pandemic-related income support, it said. Such factors could decrease the probability of Fed rate cuts, thereby supporting the appeal of U.S. fixed-income assets and demand for the greenback.
Bonds:
Treasury yields were little changed after finishing higher on Thursday following another strong government auction. A $25 billion auction of 30-year bonds went "very well" and was met with "really good demand" from indirect bidders, according to Tom di Galoma, co-head of global rates trading for BTIG in New York.
Friday brings revisions to the U.S. consumer-price index, and investors see some risk that the updated figures will show inflation was hotter than initially reported at the end of 2023.
Energy:
Oil futures were slightly lower early Friday, but are likely to be supported by continued Middle East tensions that could lead to supply disruptions. Prices are getting a boost from Israel's rejection of Hamas's terms for a cease-fire, UOB said.
Prices have continued to trade higher each day this week, with geopolitical tensions "a key source of support, particularly with recent escalations between the U.S. and Iran," said Robbie Fraser, manager of global research and analytics at Schneider Electric.
Metals:
Gold steadied in Asia amid likely subdued trade given the Lunar New Year holiday has begun in the region.
Traders are digesting the U.S. weekly jobless claims released overnight, said ANZ. The decline in claims highlights the resilience of the U.S. economy, which could prompt the Fed to refrain from lowering rates in the short term, ANZ added.
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The price of zinc has fallen too far and should claw back some of its losses in the days ahead, said Sucden Financial head of research Daria Efanova. LME 3-month zinc broke below what had been a strong support level at $2,380/metric ton after China data Thursday fanned deflation fears, leading to an accelerated selloff as put options were exercised.
"We believe that these levels are oversold, and we could see a correction in the coming days," Efanova said. The contract's price has crept up by 0.3% so far this session, to $2,335/ton.
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Iron-ore prices are holding up well given the weakness in Chinese steel demand and sentiment, said Liberum, which expects another busy restocking cycle when traders return from the Lunar New Year holiday.
"At this stage, we remain constructive on iron ore's very short-term demand/price outlook (CNY-May), while the China-centered Asian steel industry emerges from the northern winter and goes through its seasonal lift in activity," Liberum said.
It is more cautious on the 2H outlook, saying there's likely to be a seasonal pullback and that the market lacks alternative drivers of demand.
TODAY'S TOP HEADLINES
Market May Be Too Optimistic on Fed Rate-Cut Outlook
SYDNEY-The market is pricing in multiple interest-rate cuts by the Federal Reserve through 2024, but the current expectation could be overly optimistic and may drag on stocks if not realized.
That is the view of Catriona Burns, the lead portfolio manager of a listed investment company run by Wilson Asset Management. Burns thinks the market may be getting ahead of itself by pricing in as many as six rate cuts in the U.S.
A Market Correction Could Be a Stockpickers' Paradise
The S&P 500 is hovering just below the 5,000 mark after closing at yet another record on Thursday, meaning investors have seen gains of nearly 5% just over five weeks into the new year.
After such a blistering start, it isn't surprising that some strategists think the market could be due for a pause. Nonetheless, even skeptics aren't all that pessimistic, particularly because the recent rally has extended beyond the Magnificent Seven big tech companies as more winners have emerged.
UBS Loses to Whistleblower in Wide-Reaching Supreme Court Decision
A UBS unit must provide back pay to a former analyst who said he was fired for blowing the whistle on illegal pressure to change research reports, the U.S. Supreme Court said in a unanimous decision Thursday that will make it easier for whistleblowers to win retaliation lawsuits.
Whistleblowers don't have to prove they were terminated because of "retaliatory intent," the Supreme Court said in its decision, reinstating a win at trial for analyst Trevor Murray.
L'Oreal's Sales, Profit Miss Expectations on Stagnating Chinese Beauty Market
L'Oreal posted sales and profits below analysts' forecasts for 2023, a year marked by geopolitical tensions, inflation and a stagnating beauty market in China. But the company said it is confident it would outperform the market this year.
The French cosmetics company on Thursday posted sales of 41.18 billion euros ($44.37 billion) for the year, up 7.6% in reported terms and 11% on a like-for-like basis.
Sam Altman Seeks Trillions of Dollars to Reshape Business of Chips and AI
Sam Altman was already trying to lead the development of human-level artificial intelligence. Now he has another great ambition: raising trillions of dollars to reshape the global semiconductor industry.
The OpenAI chief executive officer is in talks with investors including the United Arab Emirates government to raise funds for a wildly ambitious tech initiative that would boost the world's chip-building capacity, expand its ability to power AI, among other things, and cost several trillion dollars, according to people familiar with the matter. The project could require raising as much as $5 trillion to $7 trillion, one of the people said.
Rio Tinto, BHP, BlueScope to Partner on Low-Carbon Steel From Iron Ore
Iron-ore miners Rio Tinto and BHP Group said they would join with steelmaker BlueScope Steel to consider the development of Australia's first electric-smelting furnace pilot plant that would make low-carbon steel from iron ore.
The companies will jointly aim to demonstrate they can produce molten iron from Pilbara ore using renewable power in combination with so-called direct reduced iron, or DRI, technology, they said in a joint statement on Friday. The trio will look at a number of locations in Australia for the proposed pilot plant which, if approved, could be commissioned as early as 2027, they said.
Google Pushes Deeper Into AI With Chatbot Subscription Plan
Google is jumping into the tech industry's latest craze: subscription chatbots.
The search giant will begin charging $19.99 a month for its most powerful chatbot, Gemini Advanced, as part of a subscription plan that also grants access to extra file storage and other perks.
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Expected Major Events for Friday
05:30/NED: Dec Manufacturing output
06:00/FIN: Dec Industrial Production
07:00/SWE: Dec New orders & deliveries in industry
07:00/SWE: Dec Industrial Production Index
07:00/ROM: Dec International trade
07:00/NOR: Jan PPI
07:00/NOR: Jan CPI
07:00/TUR: Dec Industrial Production Index
07:00/GER: Jan CPI
07:30/HUN: Jan CPI
08:00/SVK: Dec Industrial production
08:00/AUT: Dec Production Index
08:00/SVK: Dec Construction production
09:00/ITA: Dec Industrial Production
09:00/BUL: Dec Industrial Production
09:00/BUL: Nov Trade with EU Member States - preliminary data
09:00/BUL: Dec Trade with third countries - preliminary data
10:00/CYP: Dec Foreign Trade (provisional)
10:00/MLT: Dec International Trade
10:00/LUX: Dec Industrial Production
10:00/GRE: Dec Industrial Production Index
11:00/IRL: Dec Industrial Production and Turnover
11:00/POR: Dec International trade statistics
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
02-09-24 0028ET
