MARKET WRAPS
Watch For:
Germany industrial production index; trading updates from Puma, BMW, Henkel, Fresenius, Continental, Siemens Energy, Munich Re, Nexi, Alstom, Anheuser-Busch InBev, Ahold Delhaize, Direct Line Insurance Group, SAS
Opening Call:
European stock futures were mixed as earnings remained in focus. Asian stocks largely declined after U.S. stocks ended mixed amid a lack of fresh economic data; the dollar strengthened; Treasury yields were steady; while oil futures fell and gold was little changed.
Equities:
Stock futures were mixed early Wednesday as corporate earnings continue to roll in.
Hopes for rate cuts in 2024 had dimmed in recent weeks after a string of data showing inflation has proven stickier than expected. But the latest U.S. jobs report on Friday showed hiring slowed sharply last month, helping ease fears of an overheating economy.
Futures traders are now pricing in a roughly 90% chance that the Federal Reserve will cut rates by the end of the year, according to CME Group data.
To some, the central bank's campaign to tame price pressures still has a ways to go. Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, said Tuesday the most likely scenario for the Fed is to hold rates where they are and "sit here for an extended period of time."
"The valuation overall of stocks doesn't give you a whole lot of room if you're going to have some question mark about what your future is going to look like," said Steve Wyett, chief investment strategist at BOK Financial.
But Wyett said stocks can continue to build on their gains this year as long as it looks like inflation will continue to ease and that the Fed will cut interest rates.
Forex:
Foreign-exchange markets seem subdued amid a lack of key data or events, and USD strength has prevailed, said Charu Chanana, head of FX strategy at Saxo Markets.
Meanwhile, JPY weakness appears to have returned and "jawboning" from Japanese authorities continued, Chanana added. Earlier, Finance Minister Suzuki said excessive currency moves aren't desirable, and that authorities will take appropriate action in the FX market when necessary.
Bonds:
Treasurys were little changed after rallying overnight, spurred by buying that initially emerged during the Asia session and sent long-term yields to their lowest levels in weeks.
It was a quiet day for traders, who were focused on a trio of government auctions this week.
The Treasury's $58 billion auction of 3-year notes on Tuesday was met with good demand from non-dealers. Non-dealer bidding came in at 85.1% versus an 81.7% average, according to BMO Capital Markets strategist Vail Hartman. Tuesday's sale is set to be followed by a $42 billion auction of 10-year notes on Wednesday and a $25 billion auction of 30-year bonds on Thursday.
Energy:
Oil fell early Wednesday following news reports that Russian Deputy Prime Minister Alexander Novak indicated OPEC+ could move to increase crude production.
Although crude oil prices aren't technically in oversold territory yet, with the daily relative strength index hovering around 35 on Brent oil contract, prices are showing some signs of stabilization around key technical levels, said Fawad Razaqzada, market analyst at City Index and FOREX.com. Brent oil has been testing a key support zone around $82.40/bbl-$83.00/bbl during the last couple of days, he noted.
Metals:
Gold was little changed in Asia as traderes eye Fed cues. Minneapolis Fed President Neel Kashkari said Tuesday that he can't rule that the next move from the central bank will be a rate hike.
"The bar to raising is quite high, but it is not infinite," Kashkari said in a talk. Kashkari said he would support a hike if inflation starts to look entrenched, but added quickly that a rate hike wasn't his base case.
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Copper fell in Asian trading as the base metal looks for its next tailwind. Prices are likely to be volatile in the short term, as investors continue to look for clues on rate cuts from the Fed, Nanhua Futures said.
Copper and other industrial metals tend to benefit from looser monetary policy, which eases borrowing costs, thereby spurring more construction and manufacturing activity. High rates also boost the dollar, which can weigh on appetite for USD-denominated assets like copper.
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Iron ore prices declined in Asia. Investors see no near-term solution to China's property market woes despite recent positive signals from Beijing, ANZ said.
Steel demand from China's residential real estate sector is likely to fall further this year, ANZ added. The bank expects iron ore prices may hit a floor soon.
TODAY'S TOP HEADLINES
Profits Are Booming-and That's Shielding the Economy
Job growth took a step down in April, as reported in Friday's employment numbers. But there is a world of difference between a slightly weaker labor report and the types of job losses that could push the economy into a recession.
With corporate profits on an upswing, a major downturn in the economy could be far away.
Interest Rates Will Be Higher for Longer, Fed's Kashkari Says
Resilient economic growth and persistent inflation argue for holding interest rates at their current level for the foreseeable future, Federal Reserve Bank of Minneapolis President Neel Kashkari said Tuesday.
As many consumers and businesses have debt locked in at low interest rates, it might take longer for the Federal Reserve's restrictive monetary policy to have an impact on the real economy this cycle, he said while speaking at the Milken Institute Global Conference.
What the U.S. dollar's 'surprise' rally in 2024 means for stocks
The strengthening U.S. dollar is raising investor worries over what the greenback's rise so far in 2024 may mean for stocks.
The "surprise" rally in the dollar this year hurts U.S. company earnings, currency strategists at BoA Global Research said in a note emailed Tuesday. The ICE US Dollar Index DXY, which measures the greenback against six major currencies, was up modestly Tuesday for a gain this year of around 4%, according to FactSet data, at last check.
U.S. Treasury Bonds Have Gotten Harder to Sell. This Week Could Be Different.
It's a new and more angst-ridden era in the bond market.
Not long ago, bonds were considered unexciting-a calm and tidy way for investors to build wealth without taking the risk found in stocks. But those days seem long gone.
No, the Bond Market Isn't About to Implode. The Case for Boring.
About the author: Larry Hatheway is a co-founder of Jackson Hole Economics, which originally published this commentary, and the former chief economist of UBS.
Ukraine Says It Foiled Russian Plot to Assassinate Zelensky
KYIV, Ukraine-The Ukrainian Security Service said it foiled a Russian plot to assassinate President Volodymyr Zelensky by striking his convoy with missiles and drones, calling it the latest attempt by Moscow to eliminate the Ukrainian leader.
The agency, known as the SBU, said it had detained two senior officers in the country's Department of State Security, which is responsible for protecting the president. The SBU said they were two of five agents working on the plot under the direction of Russia's Federal Security Service, the FSB. The agency said the group was also planning to kill SBU Chairman Lt. Gen. Vasyl Malyuk, and the country's top military-intelligence officer, Lt. Gen. Kyrylo Budanov.
Reddit shares soar on revenue beat, narrower-than-expected loss in first post-IPO results
Reddit Inc. reported its first results as a public company Tuesday, with the social-media platform reporting better-than-expected revenue and a narrower-than-expected loss for the first quarter.
The company RDDT reported a first-quarter loss of $575.1 million, or $8.19 a share, after a loss of $60.9 million, or $1.05 a share, in the year-earlier quarter. Analysts surveyed by FactSet expected a loss of $8.75 a share.
TikTok Sues to Block U.S. Ban
TikTok filed a federal lawsuit Tuesday challenging the constitutionality of a new law that requires a sale or ban of the popular social-media app, setting up a court showdown over national security and free speech in the age of global information wars.
The suit, filed directly with a federal appeals court in Washington, D.C., seeks a court order preventing the U.S. from enforcing the bipartisan law signed by President Biden last month. The measure bans Chinese-backed TikTok in the U.S. unless its parent company, ByteDance, divests itself of the platform by mid-January.
International Paper stock rises on report of $15 billion buyout offer by Brazil's Suzano
International Paper Co.'s stock was up by about 6% on Tuesday after Reuters reported the company has been offered about $15 billion by Brazil's Suzano S/A.
Citing people familiar with the deal, Reuters reported that International Paper IP has been approached by Suzano SUZ with an offer to buy the Memphis paper conglomerate for $42 a share, a premium of about 14% over its closing price of $36.92 on Monday.
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Expected Major Events for Wednesday
04:30/NED: Mar Manufacturing output
05:00/FIN: Mar Industrial Production
06:00/ROM: Mar Retail trade
06:00/NOR: Mar Industrial Production Index
06:00/DEN: Mar Industrial production & new orders
06:00/GER: Mar Industrial Production Index
06:00/FIN: Mar Foreign trade
06:00/NOR: 1Q Labour force survey
06:00/DEN: Mar Balance of payments (provisional figures)
06:00/DEN: Mar External trade (provisional figures)
06:30/HUN: Mar Preliminary Industrial Production
07:00/AUT: Feb Foreign Trade
07:00/SPN: Mar Industrial Production
07:30/SWE: Swedish repo rate announcement
08:00/ICE: Mar Labour Force Survey
08:00/ITA: Mar Retail Sales
09:00/CYP: Apr Registered Unemployed
09:00/LUX: Apr CPI
10:00/POR: 1Q Employment statistics
23:01/UK: Apr KPMG and REC UK Report on Jobs
23:01/UK: Apr RICS Residential Market Survey
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05-08-24 0017ET
