MARKET WRAPS
Watch For:
E.U. monetary supply in euro area; consumer confidence survey for Germany and France; trading updates from Remy Cointreau, Volvo, Signify, Telia, Autoliv, Lonza
Opening Call:
Shares are poised to open mixed in Europe on Friday in the wake of strong U.S. GDP data and the European Central Bank's decision to stand pat. In Asia, stock benchmarks were also mixed; Treasury yields were in the red; the dollar consolidated; while oil fell after previous gains and gold was steady.
Equities:
European stocks are headed toward mixed ground on Friday after U.S. fourth-quarter GDP rose more than expected and the European Central Bank kept interest rates on hold.
Eurozone inflation needs to slow more before ECB policymakers are willing to discuss rate cuts, Rabobank said, adding that Thursday's press conference was "a necessary first step towards a rate cut, but we don't think it was as dovish as the market is pricing."
Investors see the Fed winning its inflation fight while avoiding a recession, and are anticipating up to six interest-rate cuts this year.
Forex:
The dollar consolidated in Asia, but may strengthen amid lower Treasury yields which decrease the allure of U.S. fixed-income assets and demand for the greenback.
The majority of technical analysis of G-10 currency pairs favor using any dollar rallies as selling opportunities, said RBC Capital Markets.
RBC's 'relative rotation graph' framework shows a prevalence toward dollar weakness following the Fed's policy pivot in December, it added.
Bonds:
Treasury yields declined amid renewed signs of persistent U.S. economic strength, even as prices and labor markets seem to cool down.
Fourth-quarter U.S. GDP was stronger than expected, but the quarterly data included mild PCE deflator readings.
Weekly jobless claims, meanwhile, rose more than expected, indicating that the labor market could be weakening.
December PCE core annual inflation, due later in the day, is expected in a Wall Street Journal survey of economists to slow to 3% from November's 3.2%, still well above the Fed's 2% target.
Energy:
Oil futures fell in a likely technical correction after settling at their highest levels since late November on Thursday.
Heightened geopolitical risks, such as recent shipping disruptions, will maintain the 'price premium' in oil markets, Fitch Ratings said.
However, without material disruptions to oil production or a wider escalation of attacks to more vital oil transport routes in the Red Sea region, Fitch doesn't expect a strong upside to its $80/bbl Brent crude-oil-price assumption for 2024, given material OPEC+ spare capacity.
Metals:
Gold was trading steadily, but may be weighed by fading Fed rate-cut bets, which could reduce the appeal of the non-interest-bearing precious metal.
Stronger U.S. economic data and positive sentiment in the broader financial markets have damped Fed rate-cut expectations for the March meeting, ING said.
The economic data signals the Fed may opt to wait before lowering rates, which weighs on gold demand, ING added.
---
Copper prices edged lower after a rally earlier this week.
Gains had been sparked by the PBOC's cut in the reserve requirement ratio and Beijing's rescue pledge, Citi said.
They reckon that upside risk to demand for the base metal will likely be tied to China's fiscal stimulus, although this requires more accommodative monetary policies.
Citi raised its three-month copper price forecast to $8,800 a ton amid upside risk from further China easing and tighter supply.
---
Iron-ore prices were lower after their recent rally boosted by China's measures to support the economy.
Both demand and supply are relatively weak currently, Nanhua Futures said.
While supply from Brazil has risen slightly, Australia's outflow remains flat, they noted
There is also no clear sign of rising demand as inventories of iron-ore remain stable, they added.
TODAY'S TOP HEADLINES
What to Watch in Friday's Spending Report: A Last Look at Inflation Before the Fed Meeting
Prices ticked up slightly in December, economists estimate, but the longer-run trend shows inflation cooling while consumers spent strongly and incomes grew-all ingredients of a soft landing for the economy.
What Recession? Growth Ended Up Accelerating in 2023
The recession never showed up in 2023. Consumers made sure of it.
The U.S. economy grew 3.1% over the past year, the Commerce Department said Thursday. A resilient labor market supported strong consumer spending and brushed aside a feared downturn. A year ago economists saw a recession as very likely and projected anemic 0.2% growth for the year. Instead, last year's gain was a sharp pickup from a comparable 0.7% advance in 2022.
Explaining the Unexpectedly Strong U.S. Economy: Details in 4Q GDP
The U.S. economy gained strength during the year, as Americans continued to spend money, giving the economy an unexpected boost. WSJ's Dion Rabouin digs into the latest GDP report to explain the most important details for investors in 2024.
U.K. Consumers Feeling Brighter With Inflation Trending Down
U.K. consumers continue to feel cheerier as 2024 starts, according to a survey set out Friday.
Research group GfK's Consumer Confidence Barometer rose three points to minus 19, its highest level in two years. The reading was a little better than the minus 20 expected by economists, according to a poll carried out by The Wall Street Journal.
FTC Launches Probe of Big Tech's AI Investments
WASHINGTON-The Federal Trade Commission said it would investigate the growing arms race among the biggest technology companies to produce and commercialize artificial intelligence.
The agency said Thursday it had issued orders seeking information about AI investments to Microsoft, OpenAI, Amazon.com, Anthropic and Google-owner Alphabet. OpenAI is the developer of ChatGPT, the AI chatbot that was released in November 2022 and now has versions tailored for business applications.
Will the IPO Market Spring Back in 2024? The First Big Debut Offers Clues
Wall Street has been hoping for IPOs to make a comeback in 2024. One of the first major debuts planned is off to a rocky start.
Healthcare-services company BrightSpring is on track to price its IPO below expectations, according to people familiar with the matter, after investors balked at the original price range.
U.K. to Pause Trade-Treaty Talks With Canada
OTTAWA-The U.K. said on Thursday it would pause negotiations with Canada on a comprehensive liberalized-trade treaty, citing a lack of progress. Canada said talks stalled over agriculture, and British reluctance to increase market access for the Canadian agrifood sector.
"We reserve the right to pause negotiations with any country if progress is not being made," according to a statement from the U.K. government, published on the social-media platform X, formerly known as Twitter, by the High Commissioner to Canada. The statement added that the U.K. would be willing to restart talks with Canada, so long as it benefits businesses and consumers "on both sides of the Atlantic."
Apple Issues Changes to Operating System, App Store to Comply With EU Law
Apple issued changes to its operating system and other offerings, describing them as safeguards that reduce risks a new law poses to consumers in the European Union.
The tech giant said the changes to iOS, web browser Safari and its App Store for those in the EU reflect the European Commission's designation of the offerings as "core platform services" under the Digital Markets Act. The Cupertino, Calif.-based company introduced protections including notarization for iOS apps and disclosures on alternative payments in response to what it described as new avenues for malware, fraud, scams and other privacy and security threats.
Equinor, BP to Swap Stakes in New York Wind Projects
Norwegian energy company Equinor will take over BP's stake in the Empire Wind projects in exchange for ceding ownership of its Beacon Wind lease and project.
The majority state-owned company said Thursday the deal for the swapped projects, both located off the Northeastern coast of the U.S., would be cash-neutral, except for standard settlements of cash and working capital items.
Louis Vuitton Owner's Sales Beat Expectations
LVMH Moet Hennessy Louis Vuitton posted sales above analysts' forecasts for 2023, led by strong growth at its core fashion and leather-goods division, and said it had entered the new year with confidence.
The owner of the Louis Vuitton, Dior and Celine brands on Thursday reported sales of 86.15 billion euros ($93.79 billion) for 2023, up 13% on an organic basis from the previous year. Still, organic sales growth is below the 17% the group reported between 2021 and 2022.
U.S., Iraq to Hold Talks on Phasing Out American-Led Military Coalition
WASHINGTON-The U.S. and Iraq said Thursday they plan to begin high-level talks that would lead to the departure of the American-led military coalition in Iraq while keeping the door open for a continued role for U.S. troops in assisting Iraqi forces.
A formal announcement of the talks is expected to come Saturday in Baghdad from Prime Minister Mohammed Al-Sudani, a U.S. official said. The Iraqi leader has been under some pressure from hard-line Shia politicians, some backed by Iran, to show he is taking steps to end the American military presence.
World Court Set to Decide in Genocide Case Against Israel
The International Court of Justice is set to announce Friday a preliminary decision on a charge of genocide filed against Israel for its military operations in Gaza, a case fraught with symbolism for a country founded in the aftermath of Nazi Germany's extermination of six million Jews.
(MORE TO FOLLOW) Dow Jones Newswires
01-26-24 0016ET
