Morning Markets

March E-Mini S&P 500 futures (ESH24) are up +0.02%, and March Nasdaq 100 E-Mini futures (NQH24) are up +0.27%, both at record highs. 

Stock index futures this morning are modestly higher and posted new all-time nearest futures highs. Expectations for the Federal Reserve to begin cutting interest rates early next year are underpinning stocks. Also, technology stocks are finding support amid the artificial intelligence exuberance, which has spurred gains in chip stocks.  In addition, weekly U.S. initial unemployment claims rose more than expected, a dovish factor for Fed policy.  On the negative side, energy stocks are under pressure in pre-market trading, with the price of WTI crude down more than -1%.

U.S. weekly initial unemployment claims rose +12,000 to 218,000, showing a weaker labor market than expectations of an increase to 210,000.

The markets are discounting the chances for a -25 bp rate cut at 16% at the next FOMC meeting on Jan 30-31 and have fully discounted (100%) that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are lower.  The 10-year T-note yield is up +1.5 bp at 3.809%.  The 10-year German bund yield is up +2.9 bp at 1.925%.  The 10-year UK gilt yield is up +5.8 bp at 3.494%.  

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.24%.  China’s Shanghai Composite Index closed up +1.38%.  Japan’s Nikkei Stock Index closed down -0.42%.

The Euro Stoxx 50 today is moderately lower.  Weakness in energy stocks is weighing on the overall market, with crude prices down more than -1%.  Also, hawkish ECB comments pushed European government bond yields higher and undercut stocks after ECB Governing Council member Holzmann said it's "too early" for the ECB to think about interest rate cuts now.  On the positive side, healthcare stocks and the food and beverage sector are moving higher.

ECB Governing Council member Holzmann said it's "too early" for the ECB to think about interest rate cuts now, and "there's no guarantee for rate cuts in 2024."

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 7% for its next meeting on January 25 and at 73% for the following meeting on March 7.

China’s Shanghai Composite Index today rallied to a 1-1/2 week high and settled moderately higher.  Chinese equities gained, and the yuan climbed to a 1-1/2 week high on a large inflow of foreign buying of Chinese stocks.  Also, a rotation into some of China’s worst-performing sectors and year-end position adjustments lifted the market.  In addition, some fund managers were bottom fishing as this year’s sell-off in Chinese stocks has knocked valuations sharply lower.  The estimated price-to-book ratio for stocks in the Shanghai Composite 300 fell to the lowest since 2014.  A supportive backdrop also improved market sentiment as global stocks have risen over the past few sessions on expectations that the Fed will cut interest rates next year.

Overseas investors today bought onshore Chinese equities worth 13.6 billion yuan ($1.9 billion) on a net basis during today’s session.

Japan’s Nikkei Stock Index today closed moderately lower.  Strength in the yen sparked a sell-off in exporter stocks today, leading the overall market lower after the yen climbed to a 5-month high against the dollar.  The yen rallied today on hawkish comments from BOJ Governor Ueda that suggest he is preparing the markets for a rate hike in the spring.  Ueda said it was possible the BOJ could move to exit its negative rate policy at its April policy meeting after assessing annual pay deal figures due in March.  Better-than-expected Japanese economic news on industrial production and retail sales limited losses in the overall market.  Also, strength in Japanese technology stocks limited losses in the overall market on positive carryover from Wednesday’s rally in the Nasdaq 100 to a record high. 

Japan's industrial production fell -0.9% m/m, a smaller decline than expectations of -1.6% m/m.

Japan Nov retail sales rose +1.0% m/m, stronger than expectations of +0.5% m/m.

Pre-market U.S. Stock Movers

Tesla (TSLA) is up more than +1% in pre-market trading on positive carryover from Wednesday when Wedbush Securities said the company’s delivery trajectory for Q4 looks strong.

Microsoft (MSFT) rose +0.3% in pre-market trading after Wedbush Securities raised its price target on the stock to $450 from $425. 

American International Group (AIG) climbed more than +1% in pre-market trading after HSBC initiated coverage of the stock with a buy recommendation and a price target of $86. 

LanzaTech Global (LNZA) jumped more than +5% in pre-market trading after Janney Montgomery Scott LLC initiated coverage on the stock with a buy recommendation and a price target of $10. 

Spotify Technology SA (SPOT) rose nearly +1% in pre-market trading after CICC initiated coverage on the stock with a recommendation of outperform and a price target of $210.

Energy stocks and energy service providers are under pressure in pre-market trading, with the price of WTI crude oil down more than -1%.  ConocoPhillips (COP), Devon Energy (DVN), Diamondback Energy (FANG), Haliburton (HAL), Marathon Oil (MRO), Schlumberger (SLB), and Valero Energy (VLO) are down more than -1%. 

Earnings Reports (12/28/2023)

Ocean Biomedical Inc (OCEA).

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