EU ECB Governing Council non-monetary policy meeting; U.K. PPI,
monthly automotive manufacturing figures; Germany Ifo Business
Climate Index; France Pole emploi unemployment; trading updates
from Alstom, ASML Holding, Tullow Oil, Tod's, Fresnillo, easyJet,
Lonza Group, Givaudan
Shares in Europe may open mixed on a weak lead from Wall Street;
Asian stock benchmarks broadly higher with some markets still
closed for the Lunar New Year; Treasury yields gain; the dollar
weakened; oil rose and gold fell.
European stocks could be mixed at the open early Wednesday, as
investor continue to focus on corporate earnings and economic
"The biggest thing this week would be earnings," said John Roe,
head of multiasset funds at Legal & General Investment
So far, this earnings season hasn't seen major downgrades to
corporate outlooks, or to consensus forecasts for the coming year,
Mr. Roe said.
"Everyone was worried that it could be an earnings season where
we get revisions down, so when you get a season where nothing
happens, you also get the idea that this pushes out the timing of a
U.S. recession," he said.
"The market is looking for confirmation that this rally at the
start of the year is sustainable. Every number counts," said
Antonio Cavarero, head of investments at Generali Insurance Asset
"The economy still might dodge a recession," said Bill Adams,
chief economist for Comerica Bank in Dallas, Texas.
"The first half of the winter has passed without energy
shortages, China's economy is reopening and set to accelerate, and
mortgage rates have pulled back a bit from their peaks last fall.
But the many financial and economic indicators economists use to
forecast business cycle turning points suggest that a recession is
more likely near-term."
The dollar was weaker early Wednesday. FX markets are in a
wait-and-see mood as the Fed goes into a blackout period ahead of
the next FOMC meeting, Silicon Valley Bank's Ivan Asensio said.
"This week is more about earnings releases," scrutinizing them
for clues about a potential recession, he said.
During the last few recessions the dollar tended to sell off
before a recession, recover during the recession and then sell off
again, he said.
Regarding the dollar now, he said "we milked the benefit of rate
hikes and differentials" and now it's a matter of seeing what rate
increases did and how deep slowdowns or a recession may be.
U.S. Treasury bond yields were higher early Wednesday. Yields
have been floating with a narrow range for the past few weeks as
investors try to guess how much tightening the Fed still has in the
"No FOMC member has said explicitly that they expect to pause
after the February meeting. But markets are now pricing-in a 20bp
tightening in March; one-fifth of investors, therefore are choosing
to ignore the public statements of policymakers," said Ian
Shepherdson, chief economist at Pantheon Macroeconomics.
"That has been a losing proposition over the past year, but
what's happening now, in our view, is that investors have flipped
from hanging on every word of Fed officials to trusting instead the
evidence in front of their own eyes."
"Specifically, three straight good CPI reports, slowing wage
growth, back-to-back grim retail sales and manufacturing output
reports, the sudden drop in the ISM services index, and the
recession-level NFIB index have convinced many investors that the
Fed cannot keep raising rates until core inflation is almost back
to 2%. We agree," Shepherdson said.
However, Prudent Management's Daniel Berkowitz said, "the Fed
has yet to pivot, and a target rate north of 5% in the first half
of 2023 remains likely in our view."
U.K. gilts are favorably priced at the current high yield levels
and corporate bond yields are near a decade high, making them
attractive to buy, says HSBC head of U.K. rates strategy Daniela
"In gilts, we see value in the long-end forwards, with the
secular re-allocation into fixed income at attractive levels," she
While Russell expects increased volatility in the 30-year asset
swap spreads, there is a likelihood for the products to richen in
the near term.
Oil futures gained early Wednesday, as expectations for a pickup
in crude demand from China continue to lend support.
"With the latest PMI numbers in Europe and the U.K. showing
signs of weakness despite lower energy prices, some doubt is
creeping in around any sort of rebound in economic activity,"
Michael Hewson, chief market analyst at CMC Markets U.K. said.
On Feb. 5, the European Union will impose a ban on imports of
Russia-refined petroleum products, and a price cap on Russian oil
products will also take effect.
"A key question is whether these measures are already lowering
or will further lower Russian oil production," said Stephen Innes,
managing partner at SPI Asset Management.
Uncertainty around Chinese demand and a lack of clarity of the
impact of sanctions on Russian crude oil supplies could remain the
key issues in focus for the OPEC+ alliance, ANZ analysts said.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC), which
reviews the oil market, is expected to meet on Feb. 1.
The JMMC is expected to "endorse the producer's group's current
output policy and hope that Chinese demand will balance out worries
over inflation and global economic slowdown," the Kansas City
energy at StoneX said.
Gold prices were lower in Asia, paring Tuesday gains that were
boosted by expectations for smaller U.S. interest-rate hikes.
"A weaker dollar and soft U.S. economic data could further
sweeten appetite for gold over the next few days," said Lukman
Otunuga at FXTM.
"With the U.S. dollar on the backfoot, inflation rates around
the world coming down and the Fed more likely to tone down its
hawkish rhetoric rather than ratchet it up, gold has been enjoying
a strong revival over the past three months," said Raffi Boyadjian,
lead investment analyst at XM.
"As long as inflation continues to come down and not prove
sticky, gold's uptrend should continue."
Copper prices rose in Asia, bolstered by supply-shortage issues
amid Chinese demand hopes, analysts said.
In recent weeks, social unrest has hampered production in Peru,
ANZ Research analysts said, noting MMG has said its Las Bambas
copper complex is mining at a lower rate owing to blockade-related
The industrial metal has posted robust gains this year as
China's reopening has boosted expectations of a strong rebound in
demand, the analysts added.
Base metals should enjoy another leg higher as Chinese
authorities "become more pragmatic" in managing the world's
second-largest economy, although that next step up may happen
closer to summer, Bank of America analysts said.
China's refocusing on growth has helped give some metals prices
their strongest January-to-date in years, defying a gloomy
macroeconomic backdrop, they added.
While some analysts and investors expect Chinese iron-ore demand
to pick up materially after the Lunar New Year break, UBS analysts
They expect "the demand impulse on reopening to be modest due to
the ongoing weakness in China property (more than 25% of demand)
and that iron-ore prices will fall as inventories build."
Steel ingredient iron ore has been recently trading above
$120/metric ton--an "elevated" level, the UBS analysts
said--although market activity is currently subdued due to the
holiday in China.
Demand looks weak, with China's pig-iron production falling
again in the first 10 days of January and China rebar spreads still
depressed, they added.
TODAY'S TOP HEADLINES
NYSE Glitch Causes Erroneous Prices in Hundreds of Stocks
A technical glitch at the New York Stock Exchange on Tuesday
briefly caused wild price swings and a temporary trading freeze in
stocks of major companies such as Exxon Mobil Corp., McDonald's
Corp. and Walmart Inc.
Hundreds of stocks experienced erroneous prices as a result of
the incident, the biggest snafu to hit a U.S. stock exchange in
several years, according to a spreadsheet of affected securities
released by the NYSE.
Janet Yellen Expects EV Subsidy Rules to Prompt New Trade
Treasury Secretary Janet Yellen said Japan and the European
Union would need to negotiate new trade agreements with the U.S. to
meet the mineral-sourcing requirements for an overhauled
electric-vehicle tax subsidy.
As part of the 2022 Inflation Reduction Act, the U.S. revamped a
tax credit for consumers who buy electric vehicles in hopes of
reducing U.S. reliance on China. To qualify for the full $7,500 tax
credit, among other requirements, 40% of the value of the minerals
in an electric vehicle's battery must come from a country that has
a free-trade agreement with the U.S. That amount is set to rise to
80% after 2026.
Treasury Secretary Janet Yellen Takes Measures to Ease
The Treasury Department will stop fully investing in a
government investment vehicle for federal employees as the U.S.
bumps up against its debt ceiling, Secretary Janet Yellen said
Tuesday in a letter to congressional leaders.
The department will hold back money from the Government
Securities Investment Fund of the Thrift Savings Fund, known as the
"G Fund," Ms. Yellen said. The G Fund allows government employees
to save in interest-bearing U.S. securities as part of their
International Paper Strikes Deal to Divest Russian Pulp
International Paper Co. said it has struck a deal to divest from
a lucrative Russian pulp business, the latest U.S. company to leave
Russia since Moscow invaded Ukraine.
IP said it would sell its 50% stake in Ilim Group to its Russian
partners in the joint venture for $484 million. The Memphis, Tenn.,
company said those partners, led by Ilim chairman Zakhar Smushkin,
also have indicated that they are interested in buying IP's stake
in a related corporate entity for $24 million. IP said it intends
to sell that stake as well as any residual interests in Ilim.
U.S. Poised to Provide Abrams Tanks to Ukraine
WASHINGTON-The Biden administration is poised to send a
significant number of Abrams M1 tanks to Ukraine, settling a rift
that threatened the unity of the alliance supporting Ukraine at a
pivotal moment in the war, U.S. officials said.
The move, which could be announced as soon as Wednesday, would
be part of a broader diplomatic understanding with Germany in which
Berlin would agree to send a smaller number of its own Leopard 2
tanks and would approve the delivery of more of the German-made
tanks by Poland and other countries.
Turkey Postpones Talks on NATO Bid by Sweden and Finland
ISTANBUL-Turkey postponed a key meeting with Sweden and Finland
that was intended to hash out differences over their bid to join
the North Atlantic Treaty Organization, Turkish officials said
Tuesday, intensifying a standoff over an expansion of the alliance
in response to Russia's invasion of Ukraine.
The decision is the latest setback for Sweden and Finland in a
diplomatic dispute that has unfolded since last May when Turkish
President Recep Tayyip Erdogan first threatened to veto the
countries' membership in NATO over their alleged ties to Kurdish
Tesla Eyes $3.6 Billion Factory Expansion
Tesla Inc. said it would spend more than $3.6 billion to expand
its plant near Reno, Nev., where the electric-vehicle maker
assembles batteries and produces EV car components.
The Elon Musk-led auto maker said its investment plan would
expand its lithium-ion battery and electric-vehicle-component
facilities there and employ 3,000 additional workers.
Microsoft Earnings Fell Last Quarter Amid Economic Concerns
Microsoft Corp. recorded its slowest sales growth in more than
six years last quarter as demand for its software and cloud
services cooled on concerns about the health of the global
The Redmond, Wash., company's revenue expanded 2% in the three
months through Dec. 31 from a year earlier to $52.7 billion. Its
net income fell 12% to $16.4 billion. That is the company's lowest
revenue growth since the quarter that ended in June 2016.
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Expected Major Events for Wednesday
00:01/UK: REC JobsOutlook survey
07:00/UK: Dec UK producer prices
07:00/EU: Dec New Commercial Vehicle Registrations in Europe
statistics (EU27 + EFTA3)
07:00/SWE: Dec PPI
08:00/SPN: Dec PPI
09:00/GER: Jan Ifo Business Climate Index
09:00/POL: Dec Unemployment
09:00/ICE: Dec Labour Force Survey
09:00/ICE: Dec PPI
10:00/LUX: Nov Trade
11:00/FRA: 4Q Claimant count and job advertisements collected by
14:00/BEL: Jan Business Confidence Survey
15:59/UKR: Dec PPI
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(END) Dow Jones Newswires
January 25, 2023 00:16 ET (05:16 GMT)
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