MARKET WRAPS
Watch For:
EU Flash consumer confidence indicator; U.K. Public sector finances; trading updates from Associated British Foods, SEB
Opening Call:
European stock futures broadly advanced as technology stocks continue to bolster indexes across the Atlantic. Asian stock benchmarks were mixed; the dollar weakened and Treasury yields were mostly lower; oil futures were mixed and gold gained.
Equities:
European stock futures were broadly higher early Tuesday, as investors focus on coming economic data and corporate earnings.
U.S. stocks closed higher on Monday, with the Dow Jones Industrial Average finishing at a record high. Investors are watching for the first reading of U.S. fourth-quarter GDP as well as figures on inflation and spending this week.
Stocks may still have more room to rise for the rest of the year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.
"I think the outlook for this year was still pretty positive, particularly if earnings can grow on a year-over-year basis," Saglimbene said.
However, some others are more skeptical.
"With forward multiples already at historic peaks and earnings forecasts for 12 months forward ambitious, equity-market gains may stall in 2024, as better earnings are met with lower valuation multiples characteristic of a midcycle or soft-landing environment," Morgan Stanley Wealth Management said.
Earlier Tuesday, the Bank of Japan kept its policy rates unchanged as it waits for more solid evidence of improving wage and price trends.
Forex:
The dollar weakened slightly but several developed market and emerging market central banks meetings this week, including the European Central Bank, should bring more action to currency markets, said Brown Brothers Harriman's currency analysts.
The euro is likely to stay steady ahead of the European Central Bank's meeting on Thursday but could get something of a boost from interest rates being left unchanged amid recent talk of future rate cuts, said Bas Kooijman, CEO and asset manager of DHF Capital.
Money markets are pricing in the first ECB interest-rate cut in April, according to Refinitiv.
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The yen weakened after the Bank of Japan maintained its extraordinary easing program earlier Tuesday, which puts downward pressure on the yen.
Investors will be focusing on BOJ Gov. Kazuo Ueda's press conference later in the day for any cues on any future policy shifts.
Bonds:
Treasury yields were broadly lower as markets delayed projections for an initial interest-rate cut by the Fed.
The CME's FedWatch tool prices increasing odds that the Fed will keep rates unchanged next week and in March, with an expectation of a first cut pushed down to May.
Economists surveyed by The Wall Street Journal forecast December core annual PCE slowing only slightly, to 3% from November's 3.2%, in data due Friday.
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High-yield and investment-grade bonds offering yields of around 8% and 5% respectively appear more attractive than equities, CreditSights analysts said adding that in the long-term, U.S. corporate bonds look attractive ahead of the expected interest-rate cuts.
Energy:
Oil futures were mixed in a possible technical correction after settling at their highest price levels in around a month.
Prices could get support from geopolitical tensions, analysts said with Saxo Markets' APAC strategy team noting Ukrainian drone attacks against oil facilities on Russia's Baltic coast, and escalating tensions in the Red Sea as the U.S. and U.K. launched fresh strikes against Houthi targets.
Metals:
Gold gained early Tuesday. There is strong physical demand ahead of the Lunar New Year holidays, together with signs of speculative buying activity out of China, TD Securities said.
TD Securities' tracking of the top 10 market participants in Shanghai continues to indicate more aggressive buying than would be expected by its tracking of gold withdrawals, signaling some speculative buying, it said.
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Copper prices were lower in early Asian trading, weighed by the Chinese stock market's selloff a day earlier, Nanhua Futures analysts said.
While China's copper demand is weak amid production halts ahead of Lunar New Year, the overseas market will likely also be tepid in the short term, they said.
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Iron-ore prices gained in Asia. Demand is rising as the Lunar New Year is approaching, CRU senior analyst Liz Gao said, adding that prices may also be supported by a media report on a potential two trillion yuan stimulus to stabilize the stock market.
However, ANZ Research analysts remain cautious on the outlook with the property sector still showing signs of stress.
Beijing has ordered the most indebted local governments to delay or halt some infrastructure projects, they noted.
Sources: Morningstar
