MARKET WRAPS
Watch For:
Germany CPI; UK Bank of England/Ipsos Inflation Attitudes Survey; trading updates from Berkeley Group, Hargreaves Lansdown, Anglo American, Associated British Foods, Finnair, Investor AB, DS Smith
Opening Call:
Stock futures advanced ahead of U.S. nonfarm payrolls data later today. Asian stock benchmarks were mixed; the dollar and Treasury yields were little changed; while oil and gold futures gained.
Equities:
European stock futures rose early Friday, as attention shifted to the U.S. jobs report later today. Traders will be looking for further signs of a cooling labor market ahead of the Federal Reserve's decision next week.
Data on U.S. job openings and private-sector payrolls released earlier in the week helped put a floor under stocks, to some extent, by bolstering expectations that Friday's jobs report could come in below expectations, which could make rate cuts next year more likely, said Michael Lebowitz, a portfolio manager at RIA Advisors.
"We saw a relatively weak report for ADP and JOLTS, so it seems the market, as a whole, is anticipating something lower than expectations," Lebowitz said. "The way the market interprets that is the Fed is closer to easing and won't raise rates anymore."
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The German IPO market could pick up next year if conditions become more stable, Kirchhoff Consult said. For 2024, there is a long list of companies preparing for an IPO, the German consultant said, citing around 10 potential candidates including DKV Mobility, Flix, Solarisbank and Personio.
The number of IPOs could increase depending on how strong the stock market can be given geopolitical conflicts, interest rates and the weakening global and German economies, which led to a very weak performance this year.
The total issue volume dropped to EUR1.9 billion, the second-lowest figure in 10 years, Kirchhoff Consult added.
Forex:
The Swiss franc briefly hit its highest level against the euro since 2015 on safe-haven demand and perceptions that the Swiss economy is strong compared with other major economies. Economic fundamentals suggest it could rise further, said Jefferies. "Growth in Switzerland is better than in the rest of Europe and inflation is more contained there as well."
Meanwhile, JPY strengthened amid speculation the Bank of Japan may end its negative interest-policy as soon as this month. The yen's rally came after BOJ Gov. Ueda met Japanese PM Kishida on Thursday, prompting investors to anticipate a policy shift in the not too distant future, said Fawad Razaqzada, market analyst at City Index and forex.com.
If the BOJ intensifies its policy-normalization rhetoric, this might result in a situation where JPY strengthens substantially against currencies of countries where central banks are turning dovish, Razaqzada added.
Bonds:
Treasury yields steadied early Friday as investors absorbed a likely shift in BOJ policy soon and turned their attention to Friday's nonfarm payrolls report for November.
"We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception," said Thomas Mathews, a senior markets economist for Capital Economics.
Energy:
Oil futures rose in Asian trading. There seems to be technical-related buying after oil's recent selloff sent it into oversold territory, ANZ said.
OPEC's recent announcement of deeper production cuts should also support physical balances but market participants will likely need to be convinced before any of these reductions are priced in, ANZ said.
Metals:
Gold was steady early Friday ahead of the U.S. employment report. The precious metal seems to have adopted quite a cautious stance ahead of this report, said Oanda.
A strong report could put the $2,000/oz level under pressure, while a Fed-friendly set of figures might send gold higher again, Oanda added.
Meanwhile, Citi analysts predict the shock to growth from rate increases in developed economies is not yet over, and this should support precious metals prices, weigh on crude oil and cause headwinds for base metals and iron ore.
Citi said it is bullish on gold and silver, "viewing them as safe havens amid an expected developed markets recession and their positive correlation with China's easing."
There might be reasons for optimism in industrial commodities until Lunar New Year in February due to anticipated support from China easing measures, Citi said.
TODAY'S TOP HEADLINES
Double Trouble: Investors Fight the Fed on Two Fronts
Investors are betting against the Fed-twice over. The first bet is the sudden turn from expecting the Federal Reserve to keep rates higher for longer to instead expecting rapid and deep cuts next year.
The second bet is almost the exact opposite, that the Fed will have to keep rates much higher in the long run than it says it will. Treasury yields have come down, but at around 4.1% the 10-year yield remains more than 1.5 percentage points above the Fed's forecast of long-run interest rates.
Emerging Markets Appear Solid Bet to Attract Money Leaving China
SYDNEY-The big winners from rising skittishness over the investment environment in China appear to be emerging markets such as India, the chief market strategist at financial advisory and asset-management firm Lazard said.
Foreign direct investment in China shrank for the first time in 25 years during the latest quarter as Beijing and Washington sparred over technology deemed sensitive to national security and critical minerals used in electric vehicles. Tensions have intensified further since then, illustrated by U.S. officials tightening rules around the sale of artificial intelligence-enabling chips to China.
Fundstrat's Lee reveals highest S&P 500 forecast on Wall Street. What the stock market's biggest bull expects in 2024.
The S&P 500 is poised to rally to 5,200 by the end of next year, roughly 14% from its current level, said Tom Lee, an enduring equity bull and the head of research at Fundstrat Global Advisors.
Lee on Thursday said he expects falling inflation to translate to lower interest rates and faster-than-expected erasing of financial conditions, which should boost corporate earnings and stock-market valuations.
What investors can expect in 2024 after a 2-year battle with the bond market
For a second year in a row, U.S. Treasurys have acted like a wrecking ball, with big swings in yields often calling the tune for the stock market and other assets.
The market looks steadier heading into year's end, with renewed buying interest sending the benchmark 10-year Treasury yield down from a 16-year high above 5% reached in October.
KKR Bids $1.6 Billion for U.K.'s Smart Metering Systems
Buyout firm KKR & Co. agreed to acquire London-listed Smart Metering Systems in a play to bolster renewable energy in Britain through a transaction that values the company's equity at about GBP1.3 billion, or $1.63 billion.
The Glasgow, Scotland-based company's technology includes electricity meters, utility-scale storage batteries and electric vehicle charging systems, all of which attracted the New York firm, according to a person familiar with the transaction.
Palestinian Families Seek Medical Care Outside Besieged Gaza
ARISH, Egypt-Nazha Abu Dhaahir was relieved when her 7-year-old son Yousef was chosen to leave the Gaza Strip for Abu Dhabi for treatment of his hemophilia, which can render any injury fatal. But that meant leaving two sons who have the same blood disorder in a war zone.
She and Yousef rushed to exit Gaza last week, with permission from authorities there, and within hours had boarded an Emirati plane in the Sinai Peninsula. The decision nagged at her after takeoff. Her other boys were with their father, unable to find medication, among the displaced in southern Gaza, where the Israeli ground offensive was headed next.
U.S. and U.K. Accuse Russia of Global Hacking Spree Targeting British Elections
LONDON-The U.S. and U.K. governments jointly accused Russian intelligence of orchestrating a wide-ranging, global hacking campaign over the past eight years that targeted British lawmakers, journalists and civil society organizations, in what officials described as a brazen hack-and-leak attempt by the Kremlin to interfere in British elections.
The cyberattacks also allegedly took aim at U.S. energy networks and American spies, among others, as the U.K. and U.S. governments sought to lay bare the Kremlin's commitment to disrupting Western democracies with online influence operations ahead of elections in 2024.
Xi Jinping and EU Officials Seek to Ease Economic Tensions at Beijing Summit
Chinese leader Xi Jinping and Europe's top officials sought to ease tensions over trade and economic disputes at their first in-person summit in Beijing on Thursday.
The EU's relations with China have grown tenser in recent months over the bloc's trade deficit with China, which doubled to $400 billion in the last two years.
Apple Aims to Make a Quarter of the World's iPhones in India
Apple and its suppliers aim to build more than 50 million iPhones in India annually within the next two to three years, with additional tens of millions of units planned after that, according to people involved.
If the plans are achieved, India would account for a quarter of global iPhone production and take further share toward the end of the decade. China will remain the largest iPhone producer.
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Expected Major Events for Friday
00:01/UK: Nov KPMG and REC UK Report on Jobs
05:30/NED: Oct Manufacturing output
06:00/FIN: Oct Industrial Production
07:00/SWE: Oct New orders & deliveries in industry
07:00/SWE: Oct Industrial Production Index
07:00/DEN: Oct Industrial production & new orders
07:00/GER: Nov CPI
07:30/HUN: Nov CPI
(MORE TO FOLLOW) Dow Jones Newswires
12-08-23 0016ET
