MARKET WRAPS
Watch For:
France industrial production index; Italy retail sales; trading updates from Bang & Olufsen, Sainsbury, JD Sports Fashion, Persimmon
Opening Call:
European shares could track lower at the open on Wednesday. Asian stock benchmarks were mixed; the dollar weakened slightly; Treasury yields were little changed; while oil and gold futures advanced.
Equities:
Stock futures were broadly lower early Wednesday, as investors rethink the chances of an interest-rate cut by the Fed in the near term and await new inflation data and earnings results later in the week.
There has been tax-motivated profit-taking that's occurring with the flip into 2024, said Sonu Varghese, vice president, global macro strategist at Carson Wealth.
There also has been selling on the idea that perhaps Wall Street was getting too optimistic late last year about the pace and extent of interest rate cuts this year, he added.
"Unless we see earnings estimates begin to significantly accelerate, it's hard to see how the stocks repeat last year's performance again this year," Ellen Hazen, chief market strategist and portfolio manager at F.L.Putnam Investment Management, said.
Investors are awaiting Thursday's release of the U.S. consumer-price index for December as they try to forecast when the Fed might begin cutting interest rates.
Forex:
The U.S. dollar weakened slightly in Asia but could rise on risk-off sentiment spurred by losses in most U.S. stock markets overnight.
Risk sentiment appears to be weaker, MUFG Bank's senior currency analyst Michael Wan said.
It's not entirely clear what has driven market movements given macroeconomic data on Tuesday didn't point to anything exceptional in terms of economic weakness, Wan added.
Bonds:
Treasury yields were little changed early Wednesday as traders await the next major inflation update later this week.
"With inflation falling and the U.S. Federal Reserve signaling an end to its historic tightening cycle, the landscape for bond investors is beginning to look much clearer. Even after a sharp rally in late 2023, yields still look more attractive than they have in a decade," said Pramod Atluri a fixed income portfolio manager for Capital Group.
"The prospects of owning duration appear positive. There are also opportunities in yield curve positioning. Cash equivalents may look less compelling as the Fed lowers interest rates," Atluri said.
Energy:
Oil futures edged higher in Asia as traders weighed ongoing tensions in the Middle East and continued disruptions to shipping in the Red Sea.
With U.S. oil production at record highs, there is a concern that other major producers like Saudi Arabia will attempt to defend their market share by pumping even more or offering deeper discounts, Marios Hadjikyriacos, senior investment analyst at XM, said.
This week, the oil market will want to see more "cooling inflation data and a resurgence in soft-landing hopes as well as evidence that the plunge in domestic demand at the turn of the year was a 'one-off,'" analysts at Sevens Report Research said.
The Energy Information Administration will issue its weekly data on U.S. petroleum supplies later today.
Metals:
Gold prices gained early Wednesday as investors remained cautious ahead of the key U.S. inflation data this week.
The uncertainty over the U.S. economic outlook this year and the high probability of multiple interest-rate cuts by the Fed will likely lift gold prices, analysts at China Galaxy Securities said.
However, the resilience of recent U.S. labor data and gains in energy and other commodity prices due to the Red Sea crisis may weaken gold.
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Copper edged higher in early Asian trade boosted by increased expectations of further monetary easing by the PBOC.
Copper could continue to see robust demand from China this year, Saxo Markets said.
Risk of supply disruptions and production downgrades were also supporting prices, it said, adding that the Panama government-enforced closure of the First Quantum-operated Cobre Panama mine could tighten supplies ahead.
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Iron-ore futures fell amid demand concerns.
With the Lunar New Year holiday approaching and steel mills in China experiencing losses, some of them have increased their plans for blast-furnace maintenance, information provider Shanghai Metals Market said.
The impact of blast-furnace maintenance on molten iron was 2.1 million tons this week, an increase of 37,700 tons versus last week's maintenance, SMM said, adding that iron-ore demand has softened.
TODAY'S TOP HEADLINES
Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up
Western importers are reporting a steep rise in ocean-shipping rates and weekslong delays as carriers divert ships from the Red Sea to avoid Houthi rebel attacks.
Some companies shipping goods on the crucial trade lane are starting to chafe at the rising prices and extra fees that ocean carriers are imposing for the higher cost of routing containerships on longer voyages around the Horn of Africa following drone and missile attacks by Houthi rebels in Yemen.
Global Economic Growth to Slow for Third Straight Year, World Bank Says
The World Bank expects global economic growth to decelerate for the third year in a row to a "sorry record by the end of 2024," hampered by tight monetary policy, restrictive financial conditions, and "feeble global trade and investment."
It sees the global economy expanding 2.4% in 2024, slowing from last year's growth rate of 2.6%-and nearly three-quarters of a percentage point lower than the average pace between 2010 and 2019, the World Bank said in its latest Global Economic Prospects report, released Tuesday.
SEC Blames Hack for Incorrect Post About Bitcoin ETF Approval
The Securities and Exchange Commission's official X account was hacked when the agency posted late Tuesday that it had approved exchange-traded funds holding bitcoin, forcing Chair Gary Gensler and the regulator to disavow the erroneous post.
Bitcoin briefly jumped to near $48,000 before Gensler said on the social-media network that the message was "unauthorized" and that the SEC "has not approved the listing and trading of spot bitcoin exchange-traded products." The agency later posted that its account was "compromised."
Spending Bill Won't Be Done in Time, Senate Republicans Warn
WASHINGTON-Congress may need to pass another short-term bill to avoid a partial government shutdown in less than two weeks, potentially forcing House Speaker Mike Johnson (R., La.) to break a vow he made to GOP colleagues swearing off such measures.
Senate Minority Leader Mitch McConnell (R., Ky.) said the dwindling days left before the deadline meant Congress would have to take up a stopgap bill, known as a continuing resolution or CR, to keep the government open as work continues on full-year fiscal 2024 legislation. The current interim spending law funds some parts of the government through Jan. 19 and the rest through Feb. 2.
U.S. Battery Producer Enticed to Set Up Shop in the EU
An American startup says it can cut reliance on China for key parts of electric vehicle batteries. European Union money means it will build its first factory in Europe instead of the U.S.
Rochester, N.Y.-based GDI will announce on Wednesday it is getting a EUR20 million, or $21.8 million, loan from the European Investment Bank, the lending arm of the European Commission. The battery-part manufacturer said the funds will allow it to build its first manufacturing plant in Lauenförde, Germany, which is expected to start producing from 2025 and be scaled up to a gigafactory by 2028.
Hewlett Packard Enterprise Strikes $14 Billion Deal to Buy Juniper Networks
Hewlett Packard Enterprise struck a roughly $14 billion deal to buy Juniper Networks in a big bet on networking and artificial intelligence.
The companies unveiled the transaction late Tuesday, a day after The Wall Street Journal reported that a deal was close.
Alaska Airlines Blowout Reveals Cockpit Door Vulnerability on Boeing Jet
After an emergency exit-sized hole opened in the side of Alaska Airlines Flight 1282 at 16,000 feet, a separate chaotic episode erupted when the cockpit door mysteriously flew open.
That meant the pilots were subjected to the deafening wind and noise from the back of the plane-and also made the cockpit accessible to anyone inclined to try to force their way in.
BlackRock says it's cutting 3% of its staff amid a 'rapidly changing' market environment
Investment-management giant BlackRock Inc. plans to lay off around 3% of its staff, or around 600 employees, the company said on Tuesday, amid what executives described as a "rapidly changing" economic backdrop and shifts in client demands.
In a memo to employees, Chief Executive Larry Fink and President Rob Capito said they still expected the company's workforce to be bigger by the end of the year "as we continue adding people and building capabilities to support key areas of growth."
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Expected Major Events for Wednesday
05:30/NED: Nov Manufacturing output
06:00/FIN: Nov Industrial Production
07:00/SWE: Nov Retail sales
07:00/SWE: Nov New orders & deliveries in industry
07:00/SWE: Nov Industrial Production Index
07:00/DEN: Nov Industrial production & new orders
07:00/DEN: Dec CPI
07:00/NOR: Dec PPI
07:00/NOR: Dec CPI
07:00/TUR: Nov Employment / Unemployment
07:00/TUR: Nov Industrial Production Index
07:45/FRA: Nov Industrial production index
08:00/SVK: Nov Industrial production
08:00/AUT: Nov Production Index
09:00/BUL: Nov Industrial Production
09:00/ITA: Nov Retail Sales
10:00/GRE: Nov Industrial Production Index
10:00/LUX: Nov Industrial Production
11:00/IRL: Dec Monthly Unemployment
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01-10-24 0015ET
