EMEA Morning Briefing : Stock Futures Fall Ahead of Eurozone Inflation, U.S. Jobs Data

MARKET WRAPS

Watch For:

EU flash estimate euro area inflation, PPI; Italy provisional CPI; trading updates from Sodexo, Norwegian Air, Finnair

Opening Call:

European shares look poised to open lower ahead of eurozone inflation data and the U.S. jobs report. Asian stock benchmarks were mixed; the dollar and Treasury yields were steady; oil futures rose and gold edged higher.

Equities:

Stock futures fell early Friday ahead of a number of economic data releases on the docket, including eurozone inflation and the U.S. jobs report.

A fresh batch of U.S. labor-market data on Thursday sparked renewed concerns about the Federal Reserve's monetary-tightening path in 2024.

"Short- and long-term interest rates rose modestly following the releases, due to that belief that the Federal Reserve may hold off on cutting rates in the short term if the labor market remains strong," said Sam Millette, fixed income director at Commonwealth Financial Network.

"With that being said all eyes will be on [Friday's] nonfarm payrolls report to see if headline job figures in December follow a similar pattern to ADP and initial claims."

Meanwhile, markets will look to eurozone inflation and producer prices to consider whether the recent trend of cooling prices will be enough for the European Central Bank to signal cuts to interest rates.

Forex:

There's potential for upcoming U.S. economic data to be more subdued, said Fawad Razaqzada, market analyst at City Index and FOREX.com. The greenback could easily resume its weakness again, as the Fed has made it clear that rates might be cut at least three times this year, he added.

Bonds:

Treasury yields were little changed in Asia after ending at their highest levels in weeks overnight following data showing the U.S. labor market continued to remain solid.

"Several labor-market indicators from [Thursday] looked favorable, particularly with respect to the layoff side of things," said economist Daniel Silver of JPMorgan Chase & Co.

"These reports don't give us a particularly reliable signal about the BLS data that will be released [Friday], but they seem to suggest that job growth has continued at a solid rate lately," Silver said.

Energy:

Oil futures rose in Asia, rebounding following declines overnight. WTI crude oil fell more than 1% to as low as $71.14/bbl, while Brent crude oil dropped to an intraday low of $76.58/bbl, said TD Securities, noting EIA data released Thursday spurred concerns that U.S. demand is on the slide.

Metals:

Gold edged higher early Friday, and is likely to be supported by Fed rate-cut hopes. The precious metal is expected to rise further, as USD and Treasury yields fall in anticipation that the Fed will begin cutting rates as early as March, ICICI Direct Research said.

Also, worries over slower global economic growth and escalating geopolitical tensions in the Middle East may continue to make gold valuable as a hedge against uncertainties, ICICI added.

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Copper prices gained, but the metal is entering the off-peak season for consumption, Huatai Futures said. The upward momentum for copper will likely be limited due to the recent rebound in the U.S. dollar, Huatai said. Investors are waiting for more signals on supply from copper mines.

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Iron-ore prices declined amid a possible technical correction after climbing to multimonth highs. The recent rally in iron-ore prices has been driven by the prospect of more property-easing measures in China, Donghai Futures said.

Steel mills have reduced production significantly due to poor profits, weighing on iron-ore demand. However, the mills' winter replenishment needs might provide some support on the demand side, Donghai said. Meanwhile, soaring iron-ore prices could trigger regulatory risks again, it added.

TODAY'S TOP HEADLINES

Markets Moving in Lockstep Threaten to Make for a Trying 2024

Some investors hold that as goes January, so goes the year. The performance so far-with the S&P 500 down 1.7% by Thursday's close-doesn't hold out great hope. But the first three trading days of the year offered a useful run-through of three of the ways that inflation and the economy affect your portfolio.

The year started the way the last one ended, with all the focus on the Fed and inflation, only in the opposite direction.

What to Watch in the Jobs Report: Slower Hiring Adds to Case for Soft Landing

The December employment report will show the labor market continued to cool but still added jobs at a solid pace as unemployment remained low, analysts estimate.

U.K. Economy Faces Mounting Uncertainties in 2024

The only certainty in 2024 could be uncertainty for the British economy, still reeling from sky-high inflation and rapidly rising interest rates, and gearing up for a general-election.

Indeed, the U.K. is probably the macroeconomic environment where uncertainty is the highest, according to Julien Lafargue, chief market strategist at Barclays Private Bank.

Islamic State Claims Responsibility for Deadly Bomb Attack at Soleimani Memorial

Islamic State militants claimed responsibility Thursday for a pair of bombings that killed dozens of people a day earlier in the largest attack in Iran since the country's 1979 Islamic Revolution, dispelling suspicions that Israel might have been behind the attack amid worries of a broadening regional conflagration.

The blasts took place with the Middle East on edge because of the war in Gaza between Israel and Hamas-an Islamist militant group that has moved closer to Iran in recent years-and increasing tensions between the U.S. and Israel on one side and other Iranian-backed militant groups in Lebanon, Syria, Iraq and Yemen on the other.

Supermarket Giant Drops Pepsi and Lay's Over Price Increases

One of the world's biggest supermarket chains said it would drop several PepsiCo products to protest what it called unacceptable price increases, a rare public standoff between a grocer and food maker after more than two years of rising prices.

Carrefour, which operates thousands of stores across more than 30 countries, said it would stop selling Pepsi, Doritos and other products in France, Italy, Spain and Belgium. A spokesman for the French company said Thursday that it had decided to add notes to store shelves to explain the changes to customers.

Amer Sports files initial public offering with 21 underwriters and $3.5 billion in 2022 revenue

Amer Sports Inc. on Thursday filed its initial public offering with plans to trade on the New York Stock Exchange under the symbol AS, five years after it was acquired by a Chinese consortium for about $5 billion.

The Helsinki, Finland-based company is going public with 21 underwriters including Goldman Sachs, BofA Securities, JPMorgan and Morgan Stanley as joint book-running managers, in a sign of a large deal.

Octopus Energy Has Texas-Size Ambitions

The U.K.'s largest electricity provider is powering its Texas-size energy ambitions with an Uber-like approach to renewable retailing.

Octopus Energy Group, a British energy conglomerate, entered the U.S. market through its acquisition of Houston and Silicon Valley-based startup Evolve Energy for $5 million in 2020. Now, Octopus is ramping up its Texas focus, using its renewable-energy-management system to offer cheaper prices to customers that have agreed to allow the platform to shift their demand from times of shortage to when there is abundant supply.

Walgreens' stock turns sharply lower after dividend halved to bolster cash flow

Shares of Walgreens Boots Alliance Inc. pulled a sharp U-turn into negative territory Thursday, after the drugstore chain nearly halved its dividend to bolster cash flows and provided a downbeat outlook on consumer spending.

The company lowered its quarterly dividend to 25 cents a share from 48 cents a share, with shareholders of record on Feb. 20 receiving the new dividend on March 12.

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Expected Major Events for Friday

00:01/UK: Dec BRC-Sensormatic IQ Footfall Monitor

05:30/NED: Dec Flash Estimate CPI

07:00/GER: Nov Retail Trade

07:00/DEN: Nov Unemployment

07:00/UK: Dec Halifax House Price Index

07:00/UK: 4Q Halifax House Price Index: UK Regional Breakdown quarterly release

07:30/HUN: Nov PPI

07:30/HUN: Nov Employment & unemployment

08:00/AUT: Dec Wholesale Price Index

08:30/EU: Dec EuroCOIN indicator of euro area economic activity

09:00/UK: Dec UK monthly car registrations figures

09:00/ITA: 3Q General Govt Quarterly Accounts

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

09:30/UK: Dec S&P Global UK Construction PMI

10:00/ITA: Dec Provisional CPI

10:00/ITA: Dec Cities CPI

10:00/EU: Nov PPI

10:00/EU: Dec Flash Estimate euro area inflation

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

01-05-24 0016ET