MARKET WRAPS
Watch For:
U.K. monthly retail sales figures; trading updates from Swiss Re, Eni, Norwegian Air Shuttle, Segro, NatWest Group
Opening Call:
European stock futures were higher, tracking gains in Asian equity markets; the dollar strengthened; Treasury yields rose; while oil futures were mixed and gold futures gained.
Equities:
European stock futures pushed higher early Friday as the earnings season rolls on.
U.S. stocks gained Thursday on renewed optimism about the economic outlook, extending a rebound following losses sparked by a hotter-than-expected inflation report earlier in the week.
Atlanta Fed President Raphael Bostic said rate cuts probably wouldn't be suitable until the third quarter given the current strength of the economy.
However, some analysts have argued that Tuesday's consumer-price index report may have come in surprisingly hot due to one-off factors related to businesses resetting prices at the start of the year. That argument has helped buoy stocks again.
"I'm actually encouraged," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "The rotation that we're seeing beneath the surface is a sign that there's some confidence in the economy."
Forex:
U.S. dollar strengthened early Friday. The "over-arching" environment still looks USD-positive, said Westpac Strategy Group.
Fed officials will likely take their cues from totality of U.S. data rather than a single soft retail sales reading released overnight, and the picture is one of ongoing economic resilience, the group said.
However, Maybank analysts said the overnight data suggests that the markets could be facing peak growth divergence between the U.S. and the rest of the world this quarter and backs its view for USD to gradually weaken this year.
Bonds:
U.S. Treasury yields rose early Friday.
Treasurys had rallied Thursday after data showed a decline in U.S. January's retail sales, sending yields down for a second straight session.
"The 0.8% [month-over-month] fall in retail sales in January may partly reflect the unwinding of a previous weather-related distortion, but should temper recent suggestions of an economic resurgence. We continue to expect GDP growth to slow in the first quarter," said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Traders priced in an 81.8% probability that the Fed will cut interest rates by at least 25 basis points, from a current range between 5.25% and 5.5%, by June, according to the CME FedWatch Tool.
Energy:
Oil futures were mixed as investors weigh supply and demand signals.
The International Energy Agency has warned of slower global oil demand growth in its February report, flagging a "sharp drop in China" demand, Westpac analysts said.
However, the ongoing Middle East tensions and OPEC+ efforts to curb oil supply are helping offset the more bearish IEA report, they added.
Metals:
Gold edged higher, consolidating after pushing above $2,000/oz overnight, as mixed economic data out of the U.S. increased hopes of earlier rate cuts, ANZ Research analysts said.
The number of U.S. weekly jobless claims was lower than expected, while U.S. retail sales came in softer than expected, they noted.
The latter resulted in traders pricing in more monetary easing, a tailwind for gold which doesn't pay interest, they added.
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Nickel edged higher in possible position adjustments but prospects of rising output may cap gains.
The likely winner of Indonesia's Presidential election Prabowo Subianto is expected to maintain the government's current mining policies, ING said, noting the country's expansion of nickel smelting in recent years.
Rising production in Indonesia will likely continue to pressure nickel prices this year, it added.
TODAY'S TOP HEADLINES
America's Economy Slowed-It Probably Won't Stumble
The U.S. economy took a breather in January following brisk growth at the end of last year, but it remains fundamentally healthy.
Retail sales fell 0.8% in January from December, the Commerce Department said Thursday-much worse than expectations for a 0.3% decline. Also Thursday, Federal Reserve data showed January industrial production edging down 0.1% compared with expectations for a 0.2% increase.
Investors will have to wait awhile for interest-rate cuts, Fed's Bostic says
Investors will have to wait until at least July for those widely expected interest-rate cuts, according to one Federal Reserve president's outlook.
Atlanta Fed President Raphael Bostic said rate cuts probably wouldn't be suitable until the third quarter given the current strength of the economy.
China Revives Socialist Ideas to Fix Its Real-Estate Crisis
China's massive property market is crumbling. Xi Jinping wants to revive socialist ideas about housing and put the state back in charge.
Home prices across China are falling, developers have gone bust and people are doubting whether real estate will ever be a viable investment again. The meltdown is dragging down growth and spooking investors worldwide.
Two regional Fed factory gauges rebound in February
The numbers: The New York Fed's Empire State business-conditions index, a gauge of manufacturing activity in the state, rebounded 41 points in February, but stayed below the breakeven rate at negative 2.4, the regional Fed bank said Thursday. That's the third straight month in negative territory.
The index had fallen 53 points in the prior two months.
Iran's Rise as Global Arms Supplier Vexes U.S. and Its Allies
Iran's arms industry is growing rapidly, turning the country into a large-scale exporter of low-cost, high-tech weapons whose clients are vexing the U.S. and its partners in the Middle East, Ukraine and beyond.
The transformation of the industry, accelerated by Russia's 2022 purchase of thousands of drones that altered the battlefield in Ukraine, has helped Tehran scale up its support of militia allies in Middle East conflicts that have intensified alongside Israel's war with Hamas in Gaza.
Russia Using Thousands of Musk's Starlink Systems in War, Ukrainian General Says
KYIV-Ukraine's top military-intelligence officer said Russian invasion forces in his country are using thousands of Starlink satellite internet terminals, and that the network has been active in occupied parts of Ukraine for "quite a long time."
Lt. Gen. Kyrylo Budanov's comments in an interview suggest that Russia is starting to acquire Starlink terminals, made by Elon Musk's SpaceX, at a scale that could cut into a major Ukrainian battlefield advantage. Ukraine's government said last year that around 42,000 terminals are used by the military, hospitals, businesses and aid organizations.
How Russia Recruits Soldiers From Cuba to Fight in Ukraine
On a blazing hot day in November, Raibel Palacio and three neighborhood friends boarded a flight at Cuba's Varadero beach resort, taking selfies and chattering in excitement. They had a job offer that promised a way out of the island's misery.
A few weeks later, Palacio was killed by a drone as he tried to tie a tourniquet to staunch the bleeding from a leg wound on the freezing front lines of Ukraine, said Danelia Herrera, his mother.
Egypt Builds Walled Enclosure on Border as Israeli Offensive Looms
DUBAI-Egyptian authorities, fearful that an Israeli military push further into southern Gaza will set off a flood of refugees, are building an 8-square-mile walled enclosure in the Sinai Desert near the border, according to Egyptian officials and security analysts.
For weeks, Egypt has sought to bolster security along the frontier to keep Palestinians out, deploying soldiers and armored vehicles and reinforcing fences. The massive new compound is part of contingency plans if large numbers of Gazans do manage to get in.
Nike to Cut Over 1,600 Jobs
Nike on Thursday said that it will reduce its workforce by about 2%, or more than 1,600 people, in a bid to cut costs.
Nike Chief Executive John Donahoe said the company is using its resources to increase investment in categories like running, women's apparel and the Jordan brand, according to an employee memo reviewed by The Wall Street Journal. The cuts aren't expected to affect employees in stores and distribution centers or those in its innovation team.
Chinese EV Maker BYD Exploring Mexico Factory as Entry to U.S. Market
Chinese automaker BYD has set its sights on Mexico as its quest for global expansion turns toward North America.
The Shenzhen-based car company, whose rapid growth has made it one of the world's largest electric-vehicle sellers, is scouting locations in the country for a factory, from which it would consider exporting cars to the U.S., according to people familiar with the matter.
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Expected Major Events for Friday
07:00/GER: Jan WPI
07:00/UK: Jan UK monthly retail sales figures
07:00/SWE: Jan Labour Force Survey
07:30/SWI: 4Q Industrial Production
07:45/FRA: 4Q New home sales
07:45/FRA: Jan CPI
08:00/SVK: Dec New orders in industry
09:00/BUL: 4Q Labour force survey
09:30/UK: Nov Card Spending statistics
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
02-16-24 0016ET
