MARKET WRAPS
Watch For:
EU retail trade, business & consumer surveys; Germany foreign trade, manufacturing orders; trading update from SAS
Opening Call:
European stock futures declined slightly at the start of the week. Asian stock benchmarks fell; the dollar was steady; while oil and gold futures slipped.
Equities:
Stock futures fell early Monday ahead of inflation data from a number of major economies this week, including the U.S. and China.
On Friday, data showed the U.S. economy added more jobs in December than economists had forecast. Meanwhile, revisions showed that employers added fewer jobs in October and November than previously estimated.
All told, the report did little to clarify when the Federal Reserve is likely to begin cutting interest rates. Central bank officials have signaled that they anticipate lowering rates this year, but with fewer cuts than many investors expect.
The Fed needs to keep interest rates higher because of all the uncertainty around inflation's most likely path forward, and the U.S. labor market "won't degrade fast enough in the first quarter to justify a first rate cut in March," said Mike Sanders, head of fixed income at Wisconsin-based Madison Investments.
Rate-cut expectations are "going to be the issue for 2024, and a lot of it is going to be revolving around inflation getting back to that 2% target," Sanders said.
Forex:
The dollar was steady in Asia. Few hints are expected this week in terms of altering traders' views on the Fed's rate trajectory, said Jeff Ng, SMBC's head of Asia macro strategy, and Ryota Abe, an SMBC economist.
This week's focus is likely to be on the U.S. December CPI, for which easing inflationary pressures could encourage the Fed to shift its stance on rate cuts gradually, they add.
Bonds:
Treasurys didn't trade in Asia due to a market holiday in Japan.
Treasury yields finished mostly higher Friday, leaving long-term rates with their biggest weekly rise since October, after robust jobs data outweighed a weaker-than-expected ISM survey of business conditions.
Friday's jobs data supports the notion of the Fed "pivoting to rate cuts on a slower timeline relative to market expectations," said BNP Paribas.
"A labor stall (not our baseline) could yet pull cuts forward into March, but notably there will not be another jobs report ahead of the Jan. 31 rate decision. We continue to see the first rate cut in May," BNP Paribas said.
Energy:
Oil futures fell early Monday after Saudi Arabia slashed prices of its Asian crude exports amid weak demand.
However, geopolitical risks still post an upward risk to oil prices, Saxo Markets said. U.S. Secretary of State Antony Blinken warned that the Israel-Hamas war could easily spill over into a full-blown regional conflict.
Meanwhile, oil supply risk in the region has been highlighted by Maersk's announcement that it will divert all vessels away from the Red Sea for the foreseeable future, warning customers to prepare for significant disruption, Saxo added.
Metals:
Gold prices edged lower in Asia after higher-than-expected U.S. December nonfarm payroll data. The jobs report released last Friday showed the resiliency of the U.S. economy and once again lifted Treasury yields, Nanhua Futures said. Gold tends to move inversely to Treasury yields, as higher yields undermine the appeal of the non-interest-bearing precious metal.
The data also casts some doubt on market expectations of the Fed cutting interest rates soon, Nanhua said. Markets are focusing on U.S. CPI data this week to further gauge the precious metal's price movements.
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Greater-than-expected industrial metals supply growth continues to push up stockpiles, especially for aluminum, said Ruben Gargallo Abargues, assistant economist at Capital Economics.
Still, Abargues reckons metals supply growth will be more modest this year, while growth in demand will rebound as the energy transition gathers pace. "Accordingly, we expect base metals prices to fare better this year," with copper prices likely to rise the most, Abargues said.
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Most iron-ore futures dropped, weighed by signs of weak seasonal demand for the underlying metal. A seasonal lull in demand has lifted iron-ore port inventories in China to the highest level since the week ended Sept. 1, 2023, ING said.
Iron-ore port inventories in China have been on seven straight weeks of increases, rising by 1.5 million tons over the last week to 116 million tons.
TODAY'S TOP HEADLINES
Saudis cut crude prices to all regions amid oil-price weakness
Saudi Aramco on Sunday said it would cut crude prices to all regions, including its largest market in Asia - a move that comes amid weaker global oil prices and increased production by producers outside the Organization of the Petroleum Exporting Countries.
In a notice, state producer Aramco SA:2222 said February prices for various grades of Saudi crude, including its flagship Arab light, in Asia would fall $2 a barrel versus the Oman/Dubai regional benchmark from their January levels.
Congressional Negotiators Reach Agreement on $1.6 Trillion Government Spending Level for 2024
WASHINGTON-Congressional leaders reached a bipartisan deal on Sunday setting a roughly $1.6 trillion federal spending level for the year, but the pact drew quick criticism from some conservatives and it remained unclear whether lawmakers would be able to quickly pass legislation averting a government shutdown.
The House and Senate now have less than two weeks to craft underlying bills funding the government, with several federal agencies set to run out of money later this month and the rest to follow in February, a tall order in a Congress that has struggled to pass major legislation on time.
The Stock Rally Has Stalled. Now Comes Earnings Season
After a recent pullback in stocks, investors are looking to the coming earnings season for clarity on companies' growth prospects.
U.S. stocks defied expectations to rally in 2023 but have struggled to extend gains into the new year. The S&P 500 shed 1.5% in the first week of January. Tech stocks, which led the market last year, have stumbled, with Apple and Microsoft falling 5.9% and 2.2%, respectively, in the past week.
The Crypto Industry Holds Its Breath in Anticipation of the First Spot Bitcoin ETFs
Bitcoin has rallied for months ahead of the expected launch of the first U.S. exchange-traded funds to hold the cryptocurrency. Skeptics say it is nearly out of room to run.
The Securities and Exchange Commission could approve the funds, known as spot bitcoin ETFs, as soon as next week. Approval would mark a watershed moment for the industry, allowing investors to purchase bitcoin in their brokerage accounts as easily as stocks. (Funds that track bitcoin futures are already on the market.)
Israel's Yoav Gallant: 'We Are Fighting an Axis, Not a Single Enemy'
TEL AVIV-Israel's defense minister, Yoav Gallant, says the scale and severity of the Oct. 7 assault on Israel by Palestinian Islamist militant group Hamas deeply shook Israelis' sense of security and profoundly altered the way they view the world around them.
"October 7 was the bloodiest day for Jewish people since 1945," Gallant, a general-turned-politician, told The Wall Street Journal. "The world needs to understand. This is different."
Europe's Decision to Ground Boeing 737 MAX 9 Jets Tells Investors Something
The European aviation regulators have followed orders by the Federal Aviation Administration for the temporary grounding of many Boeing 737 MAX 9 aircraft, after a MAX 9 operated by Alaska Air lost a section of its fuselage in midair on Friday.
The damaged plane was able to return to the Portland, Ore., airport, where the flight originated, and no one onboard was injured.
Israel Presses Egypt to Better Secure Borderland Against Hamas Smugglers
Israel and Egypt are negotiating the future of a corridor between Egypt and Gaza that Israel says has been used by Hamas to smuggle weapons and people through underground tunnels and is key to destroying the militant group.
Israel has requested that sensors be installed along the Philadelphi Corridor-the sliver of land controlled by Egypt that borders Gaza-according to senior Egyptian officials, to alert Israel in case Hamas attempts to rebuild a tunnel and smuggling network after the war. Israel, which used to control the corridor, also requested direct notifications if the sensors are triggered and the right to send surveillance drones into the area in case of such a trigger, the officials said.
Nvidia's New China Pickle: Customers Don't Want Its Downgraded Chips
SINGAPORE-After U.S. regulations barred Nvidia from selling its high-performance artificial-intelligence chips to China in October, the company's engineers quickly designed a new lineup to comply with the tightened rules.
The U.S. tech company may have found some wiggle room, but it faces a bigger problem: Chinese cloud companies-some of Nvidia's biggest customers globally-aren't so keen on buying its lower-powered AI chips.
Boeing Is Back in the Spotlight-This Time Over a MAX 9
The last thing Boeing needed was more trouble with its 737 MAX jet. That is exactly what it got to start the new year.
The company had just started to regain its footing after years of tumult around the popular but troubled line of narrow-body jets when a MAX 9 operated by Alaska Airlines had a structural failure Friday night.
Write to singaporeeditors@dowjones.com
Expected Major Events for Monday
00:01/UK: Dec KPMG and REC UK Report on Jobs
07:00/FIN: Nov Foreign trade
07:00/GER: Nov Foreign Trade
07:00/GER: Nov Manufacturing orders
07:00/GER: Nov Manufacturing turnover
07:00/ROM: Nov Retail trade
07:00/NOR: Nov Industrial Production Index
07:30/SWI: Dec CPI
07:30/HUN: Nov Retail Sales
07:30/SWI: Nov Retail Sales
08:00/SVK: Nov Internal trade, including Wholesale & Retail
08:00/CZE: Nov External trade
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01-08-24 0017ET
