EMEA Morning Briefing : Stock Futures Muted as Investors Weigh Fed Officials' Comments

MARKET WRAPS

Watch For:

Germany industrial production index; Italy retail sales; trading updates from Deutsche Boerse, TotalEnergies, Siemens Energy, Telenor, Pandora, Equinor, SAS, Finnair, Sainsbury, DCC, Smurfit Kappa Group, AkzoNobel, Assa Abloy, Orsted, Barratt Developments, Ashmore Group, Babcock International

Opening Call:

European stock futures were muted as investors weighed comments by Fed officials. Asian stock benchmarks largely advanced on expectations of support from Beijing; the dollar edged lower; Treasury yields fell; while oil futures rose slightly and gold was flat.

Equities:

Stock futures were little changed early Wednesday as markets continued to parse comments from a slew of senior Federal Reserve officials that the central bank wants more assurance inflation is slowing before cutting interest rates.

"It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%," Cleveland Fed President Loretta Mester said in a speech.

"Doing so would undermine all the good work that has gone into getting inflation to this point," she said.

Meanwhile, markets continue to watch for a steady stream of corporate earnings results.

Forex:

The dollar rally took a pause as markets wait for fresh data to gauge the likelihood of interest-rate cuts in the U.S. in the next few months.

"The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years," Deutsche Bank said. "We continue to see the risks skewed towards less Fed easing and therefore in favor of the USD."

Bonds:

Treasury yields were little changed early Wednesday as Fed officials continued to push back against markets' hopes of an early start of the U.S. easing cycle. May is now seen as the most likely FOMC meeting to launch the easing cycle, according to the CME's FedWatch tool.

Energy:

Oil futures extended gains in Asia as Middle East tensions remained in focus.

Negative developments concerning the U.S. and Iran "may keep supply risks elevated, translating to further gains" for U.S. benchmark oil prices, said Lukman Otunuga, manager of market analysis at FXTM. "Geopolitical tensions are likely to keep crude bulls in the game above $70."

Still, upside price gains may be "capped down the road due to rapidly falling expectations around aggressive Fed rate cuts and growing concerns over China's economy," he said.

Metals:

Gold futures were flat early Wednesday as investors digested mixed cues from Fed officials. After Chairman Powell indicated the Fed's careful stance, Cleveland Fed governor Loretta Mester said the central bank will probably gain confidence to cut rates later this year.

Gold will likely continue to fluctuate as more Fed officials give speeches in the near term, Orient Securities said. Investors will keep an eye on U.S. CPI data next week to further gauge the Fed's next move.

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Copper edged higher amid positive sentiment spurred by Beijing's signaling of its intent to prop up the beleaguered equities market. Chinese officials unveiled a slew of measures, including a state fund's pledge to boost stock purchases, ANZ said.

The stock-market rout has threatened to adversely affect economic activity as companies shift their focus away from core businesses, ANZ said.

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Iron ore advanced after a recent drop. Market sentiment could be boosted by China's latest stock-market stimulus.

Citi remains bullish on iron ore near term despite a seasonal slowdown ahead of the Lunar New Year. The bank thinks the People's Bank of China will continue ratcheting up support for housing through policy bank loans and other measures.

Iron ore's fundamentals may improve after the holiday as mills resume production and downstream steel demand rises, Citi added.

TODAY'S TOP HEADLINES

Fed's Mester warns against cutting interest rates too soon and too quickly

Cutting interest rates too soon would risk some of the progress seen on reducing inflation and might cause interest-rate policy to reverse course, Cleveland Federal Reserve President Loretta Mester said Tuesday.

"It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%," Mester said in a speech to the Ohio Bankers League meeting in Columbus, Ohio.

Fed's Harker says a 'soft landing' is in sight as inflation wanes

The president of the Philadelphia Federal Reserve said inflation is slowing toward low, pre-pandemic levels and that the central bank appears primed to achieve a "soft landing" for the U.S. economy.

The Fed's "balanced" approach "has put us on the path to a soft landing, " Patrick Harker said in prepared remarks at a forum at Rowan University in New Jersey.

Inflation isn't 'all the way there' to the Fed's 2% goal, Kashkari says. Rate cuts can wait.

The rate of U.S. inflation is getting close pre-pandemic levels, but "we are not quite there yet," the chief of the Minneapolis Federal Reserve said Tuesday.

Neel Kashkari echoed a slew of other senior Fed officials in saying the central bank wants more assurance inflation is slowing toward the central bank's goal of 2% before cutting interest rates.

Israel Privately Estimates as Many as 50 Hostages Could Be Dead

DUBAI-As many as 50 of the hostages taken from Israel by Hamas on Oct. 7 could be dead, a figure that is considerably higher than the 29 deaths Israel has publicly acknowledged, according to an Israeli assessment shared with U.S. and Egyptian officials.

The estimate was presented by Israel during hostage negotiations in Cairo in recent weeks, according to Egyptian officials, and has played a key role in negotiations for the release of hostages-alive and dead-still being held in Gaza.

Tucker Carlson Says He Is Interviewing Russian President Vladimir Putin

Tucker Carlson said he is interviewing Vladimir Putin during a visit to Moscow, making him the first member of the U.S. media to be granted an interview with Russia's president since that country's invasion of Ukraine in 2022.

Carlson, a far-right commentator and former Fox News star, said in a video posted to X that it was important to understand Putin's views given how the war is reshaping the world. The U.S. has provided billions of dollars in financial, humanitarian and military assistance for Ukraine.

Judge Tosses Lawsuit Over Apple Watch Heart Rate Algorithm

A federal judge has tossed out a lawsuit filed by the venture-backed medical products company AliveCor against Apple over heart-rate monitoring technology in the Apple Watch.

Judge Jeffrey White, sitting in the Northern District of California, granted Apple's motion for summary judgment in the case. The detailed decision remains under seal.

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Expected Major Events for Wednesday

06:45/SWI: Jan Unemployment

07:00/NOR: Dec Industrial Production Index

07:00/UK: Jan Halifax House Price Index

07:00/GER: Dec Industrial Production Index

07:00/DEN: Dec Industrial production & new orders

07:45/FRA: Dec Foreign trade

07:45/FRA: Dec Balance of payments

07:45/FRA: 4Q Flash estimate of job creation

08:00/SWI: Jan SNB foreign currency reserves

08:00/AUT: Jan Wholesale Price Index

08:00/AUT: Nov Foreign Trade

08:00/CZE: Dec Retail trade

08:00/SPN: Dec Industrial Production

09:00/ICE: Jan External trade, preliminary figures

09:00/ITA: Dec Retail Sales

09:30/UK: Jan Narrow money (Notes & Coin) and reserve balances

10:00/GRE: Dec External Trade (provisional data)

10:00/MLT: Dec Industrial Production Index

11:00/FRA: Dec OECD CPI

11:00/POR: 4Q Employment statistics

16:59/POL: Polish 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

02-07-24 0022ET