EMEA Morning Briefing : Stock Futures Track Higher; Earnings in Focus

MARKET WRAPS

Watch For:

No major economic data expected; trading updates from AstraZeneca, Unilever, Siemens, Societe Generale, Credit Agricole, Publicis Groupe, British American Tobacco, A.P. Moller-Maersk, Anglo American, Vinci, L'Oreal, Kering, Enel, Aker Solutions, Adyen, SSE, Compass Group

Opening Call:

European stock futures were higher tracking Wall Street's overnight gains. Asian stock benchmarks were mixed after China's consumer prices came in weaker than expected; the dollar edged lower; Treasury yields fell; while oil futures advanced and gold declined.

Equities:

Stock futures were higher early Thursday as investors refocus their attention on corporate earnings looking for assurance that profits can support market gains.

U.S. stocks rose on Wednesday as traders come to terms with the likely prospect of having to wait until May for an interest-rate cut by the Federal Reserve.

"Investors are taking heart in well-received earnings reports and are settling into [Federal Reserve Chair Jerome] Powell's message, which has moved away from 'higher-for-longer' rates to 'higher-for-not-that-much-longer' rates," said Keith Buchanan, senior portfolio manager at Globalt Investments.

Earlier today, official data showed that China's consumer-price index posted its biggest annual fall in over a decade, underlining continued weakness in domestic demand as the economy struggles to regain momentum.

Forex:

The U.S. dollar weakened slightly amid risk appetite and falling Treasury yields which reduce the appeal of U.S. fixed-income assets and demand for the greenback.

The U.S. dollar is at risk of falling as the Fed is succeeding in tackling inflation, with interest-rate cuts on the horizon, Societe Generale said as it reduces its exposure to the currency.

Societe Generale forecasts EUR/USD to rise to 1.10 in March 2024, 1.12 in June and 1.16 in December.

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TD Securities advises selling the Swiss franc against the yen as the franc trades near an all-time high and looks expensive, while a policy pivot and potential rate hike by the Bank of Japan is still in the cards.

TD's high-frequency fair value model has suggests CHF/JPY is "rich" and a correction is due.

"A strong CHF has been useful in combating rising inflation but is starting to weigh on exporters," it said.

Bonds:

Treasury yields were lower early Thursday with investors coming around to the likelihood that the Fed will not start to cut interest rates until perhaps May at earliest.

Treasury's $42 billion auction of 10-year notes on Wedesday was met with solid demand with indirect bidders taking 71% of the sale, which is slightly above average, according to Tom di Galoma, co-head of global rates trading for BTIG in New York.

The sale ranks as the largest on record for the 10-year note.

Energy:

Oil futures advanced amid renewed Middle East tensions that could disrupt supply.

Israeli PM Benjamin Netanyahu on Wednesday evening rejected Hamas's terms for a cease-fire in Gaza, and vowed to continue Israel's military campaign against Hamas in Gaza.

This has helped boost crude oil prices, Westpac said.

Metals:

Gold prices were slightly lower early Thursday.

While Fed officials have said they don't see an urgent case to cut rates, there is a high chance that central banks in the world's major economies will enter an easing cycle this year, Huatai Futures analysts said.

The outlook for the precious metal remains optimistic against this backdrop, they said.

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Copper gained in Asia as traders digested mixed signals.

China's refined copper production declined 3% on-month in January, ANZ Research analysts said.

However, the Democratic Republic of Congo's copper exports jumped 17% in 2023, while Peru's production reached a record high last year, they added.

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Iron ore advanced amid positive sentiment boosted by Chinese regulators' support for property developers, ANZ Research analysts said.

Lower iron ore inventories at major Chinese steel mills were also supporting prices as there could be an increase in restocking demand after the Lunar New Year holiday, they added.

TODAY'S TOP HEADLINES

China's Consumer Prices Fall by More Than Expected

China's consumer-price index posted its biggest annual fall in over a decade, underlining continued weakness in domestic demand as the economy struggles to regain momentum.

The consumer-price index fell 0.8% in January from a year earlier, accelerating from the 0.3% drop seen in December, the National Bureau of Statistics said Thursday. A Wall Street Journal poll of economists had tipped a 0.6% decline for the first month of the year.

Fed's Barkin says recent progress on inflation might be a 'head fake'

It's a good idea for the Federal Reserve to take its time with interest-rate cuts given all of the uncertainty about where the U.S. economy is headed, Richmond Fed President Tom Barkin said Wednesday, in an interview with MarketWatch.

"In all honesty, my forecast is uncertain. That's why I think it's a reasonable idea to be patient," Barkin said.

Israel's Netanyahu Rejects Hamas's Response to Cease-Fire Proposal

Israeli Prime Minister Benjamin Netanyahu rejected Hamas's terms for a cease-fire in Gaza, after the Palestinian militant group called for the release of thousands of prisoners along with other concessions in its first response to a U.S.-backed proposal to end the fighting.

The dismissal was a setback for a U.S. diplomatic push led by Secretary of State Antony Blinken, who met with Israeli leaders on Wednesday during a fifth visit to the region aimed in part at defusing tensions before a possible Israeli military offensive on Rafah, a city in southern Gaza near Egypt's border where over a million displaced Palestinians have sought refuge.

Ukraine Rations Munitions as Cut to U.S. Aid Looms, Russia Inches Forward

KYIV, Ukraine-After a hard day of fighting last month, Ukrainian troops lost a couple of ditches near the northeastern city of Kupyansk. By the following morning, the Russians had dug a mile-long trench and were firmly established.

A Ukrainian sniper listening in on a Russian radio channel heard how. The Russians had deployed a special trench-digging team typically made up of drunks and other ne'er-do-wells. When one refused to dig, one Russian officer reported, the laggard was swiftly dealt with: "We eliminated him."

Amazon's Newest Competitors Are Stepping Into Its Territory-Literally

Fast-fashion company Shein and TikTok's shopping unit are expanding in Amazon.com's territory, seeking to poach Amazon's employees and building out workspaces in the same Seattle-area office tower.

The two companies are bolstering their staff at a 22-story tower near Seattle known as the Key Center, and both are recruiting current and former Amazon employees as they expand their U.S. logistics and supply-chain operations.

Disney Turns to Taylor Swift, 'Fortnite' to Bolster Its Fortunes

Football, "Fortnite" and Taylor Swift-the new, rebuilt Disney that Bob Iger has been promising investors and fans is coming into focus.

In a series of sweeping announcements as part of the company's quarterly earnings report Wednesday, Iger presented a vision of a new Disney that will embed the entertainment giant further into the American pop-culture psyche. The wide-ranging initiatives marry the company that created Mickey Mouse and Donald Duck with some of the biggest brands in contemporary entertainment.

Arm stock soars 20% as chip maker sees 'signs of recovery' in its market, raises guidance for the year

U.S.-listed shares of Arm Holdings PLC rallied 20% in extended trading Wednesday after the chip designer raised its guidance for the year, saying it is seeing green shoots in the semiconductor market.

Arm ARM amassed higher royalty rates for its latest chip, which the company said were "typically at least double" the royalty rates for its predecessor. It also gained market share in the cloud-server and automotive markets, garnering new royalty streams, it said.

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Expected Major Events for Thursday

00:01/UK: Jan KPMG and REC UK Report on Jobs

00:01/UK: Jan RICS Residential Market Survey

05:30/NED: Jan CPI

07:00/NOR: 4Q Labour force survey

07:00/DEN: Dec External trade (provisional figures)

07:00/DEN: Dec Balance of payments (provisional figures)

08:00/CZE: Jan Unemployment data

08:00/SVK: Dec Foreign trade

09:30/UK: 4Q Mortgage and landlord possession statistics

09:30/UK: 4Q Mortgage Arrears and Possessions data

10:00/CRO: Dec Foreign Trade

10:00/LUX: Jan CPI

13:30/CZE: Czech interest rate decision

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

02-08-24 0018ET