MARKET WRAPS
Watch For:
Manufacturing PMI for Eurozone, France, Germany, Italy; ECB Executive Board Member Philip Lane delivers a lecture on 'Monetary Policy Tightening in the Euro Area'; U.K. BOE interest-rate decision; Germany unemployment; trading updates from Shell, BT Group, Sainsbury, ING Group, EDP, Ferrari, Yandex, Novo Nordisk, Heidelberg Materials, AXA, Deutsche Lufthansa, Norwegian Air Shuttle, Ryanair Holdings, Fresenius SE & Co., Fresenius Medical Care, Hugo Boss, Zalando, Koninklijke, Haleon, Babcock International Group, Hikma Pharmaceuticals, Harbour Energy, Entain, Sibanye-Stillwater, Smith & Nephew, Howden Joinery Group
Opening Call:
Stock futures gained ahead of the Bank of England rate decision later today. In Asia, stock benchmarks were higher; the dollar weakened; Treasury yields edged lower; while oil futures and gold gained.
Equities:
European stock futures advanced ahead of the Bank of England rate decision.
The Bank of England is expected to keep interest rates unchanged, following in the footsteps of the Federal Reserve and European Central Bank.
U.S. stocks ended sharply higher Wednesday after the Federal Reserve left interest rates unchanged as expected at a 22-year high and signaled rates would remain elevated well into next year to keep inflation moving down.
Powell said policy makers were asking themselves whether they had hiked enough, and said they weren't confident rates were yet restrictive enough. That means the Fed is going to take it meeting by meeting, weighing the data as it decides whether it needs to make another move.
"Powell had several opportunities to threaten another rate hike, but passed on most of them," said Thomas Simons, U.S. economist at Jefferies.
Fed funds futures traders were now more skeptical the central bank would deliver a December rate hike.
Market participants now price in a 19.8% probability the Fed will lift rates by 25 basis points, or a quarter point, at its final policy meeting of 2023.
They see an 80.2% chance the Fed stands pat for a third straight meeting.
Forex:
The U.S. dollar weakened on the prospect that the Fed's tightening cycle may be nearing an end.
While the Fed left rates unchanged, acknowledged a strong economy and left the door open to another rate increase, market participants have taken more notice of Fed Chair Powell's comments that the U.S. central bank has "come far," said Matt Simpson, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!DWl107Th_Sx7x_HALpJ6rpKoZ981hI0l3Y3gP4humqY1dgeU2JBnBklbRAhnjRdyb9TfOhSaIiOPXj8QW4pDXOkhHHt3Jv_ZRMy0458q2tw$ .
Odds of a hold decision in December have also risen to 80.12% versus 68.9% the day prior, Simpson added.
Bonds:
Treasury yields edged lower in Asia after Federal Reserve officials took no action on interest rates for a second straight meeting.
Analysts focused on the part of the Fed's policy statement which referred to the recent rise in Treasury yields and indicated that tighter financial and credit conditions are likely to weigh on the economy.
"The market is interpreting the statement as dovish because the Fed expects tightening in financial conditions to slow economic activity," said Olumide Owolabi, the Chicago-based head of the U.S. rates team at Neuberger Berman.
"While markets may be more focused on 'higher for longer' these days instead of recession risks, we are still cautious about the economic outlook," said BeiChen Lin, investment strategy analyst at Russell Investments.
"We believe the economic risk factors are still present, even if the market is temporarily focused on other things. Against this backdrop, we continue to think that U.S. Treasuries could be an important defensive lever in a portfolio."
The U.S. Treasury Department on Wednesday said it would sell $112 billion in notes and bonds next week, not far out of line with expectations.
Many investors have partly blamed the rise in benchmark bond yields in recent weeks to 16-year highs on the market's fear about increased supply of Treasurys.
Energy:
Oil futures gained in Asia amid mixed cues.
Crude oil was struggling to find direction with the Israel-Hamas overhang remaining, Saxo analysts said.
While the risks weren't accelerating rapidly, the Fed's less hawkish message supported a growth outlook, they said.
At the same time, China's economic numbers painted a less supportive picture for now, they added.
Investors have "shrugged off risks from the Middle East conflict and instead remained focused on fears of weaker global demand," said Rob Haworth, senior investment strategist at U.S. Bank Asset Management.
Commodity analysts at Goldman Sachs said Wednesday that the market for crude will continue to tighten, and backed up their forecast for Brent to hit $100 a barrel by June.
Metals:
Gold prices rose early Thursday after settling lower overnight.
In focus was the Fed, which continued its rate hikes pause but left the door open to a future increase.
Peter Cardillo of Spartan Capital Securities had previously expected the pullback to generate buying activity, but it didn't.
The non-interest-bearing metal, which typically moves inversely to rates, remains below $2,000/oz and is taking longer to rebound above the key level than analysts had expected.
"Gold gyrated around recent levels, surprisingly not finding a bid despite a run lower in [the] dollar and Treasury yields," as well as the Fed sounding less hawkish, Saxo analysts said.
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Aluminum advanced on positive sentiment generated by prospects that the Fed may be approaching the end of its tightening cycle following Powell's comments overnight.
Also, aluminum may be supported by supply-side issues, analysts said.
Aluminum smelters in China's southern province of Yunnan plan to cut production again this winter as hydropower supply declines during the dry season, ING commodities strategists said, citing information provider Shanghai Metals Market.
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Iron-ore futures rose amid tightening supply and better investor sentiment.
Iron ore exports from Australia declined more than three million tons in the week ended Oct. 27, with expectations of further falls in 4Q, ANZ analysts said.
Meanwhile, investor sentiment was being lifted by expectations for China to continue supporting macro stimulus policies in the near future, which have been the main driver of iron ore prices, Guantong Futures analysts said.
TODAY'S TOP HEADLINES
Fed Extends Pause on Rate Hikes but Keeps Door Open to Moving Higher
WASHINGTON-Federal Reserve Chair Jerome Powell hinted the central bank might be done raising interest rates for now but was careful not to rule out another increase after officials extended a pause in hikes.
Officials voted unanimously on Wednesday to leave rates unchanged at a 22-year high. "The committee is proceeding carefully," Powell said during a press conference where he said nothing to shift the market's expectation that officials won't raise rates in December.
Fed Takes Heart in a Supply-Side Boom
When spending and employment grow as quickly as they have lately, it normally means inflation pressure is building and the Federal Reserve might have to raise interest rates.
But on Wednesday Fed Chair Jerome Powell suggested otherwise. Demand, he said, has indeed grown rapidly, but so has supply. A supply-side boom generates the best of all worlds: brisk growth and falling inflation.
Bank of England Expected to Follow Fed With Interest-Rate Pause
The Bank of England is expected to keep interest rates unchanged on Thursday, following in the footsteps of the Federal Reserve and European Central Bank.
Like the Fed, the BOE is battling inflation that hasn't returned to its target despite a series of rate hikes. Between December 2021 and August this year, the U.K. central bank has increased borrowing costs at 14 straight meetings. Now, officials say they are taking a more cautious approach as they evaluate the effects of previous hikes.
Apple earnings are on deck, and Wall Street isn't feeling so cheery
How is the iPhone 15 doing in a choppy economic environment? Investors are about to find out.
Apple Inc.'s AAPL September-quarter results, due out Thursday afternoon, should offer an early glimpse of the iPhone 15's performance, as the period included just over a week's worth of sales of the consumer-electronics giant's new lineup. Management's commentary on the earnings call will tell even more of the story.
Why Jamie Dimon Changed His Mind on Europe
LONDON-Not long ago, JPMorgan Chase Chief Executive Jamie Dimon insisted the Wall Street giant would never get into retail banking in Europe.
Now, he's all in.
CVC Drops Planned IPO
Global buyout firm CVC Capital Partners pulled its plans to list in Amsterdam, another blow to the struggling initial public offering market.
CVC, which competes against Blackstone, Apollo Global Management and other private-equity giants, had been preparing to launch the offering as soon as this week but has now postponed the new issue because of jittery market conditions, people familiar with the matter said.
Novo Nordisk Reports Earnings Soon. Wegovy and Ozempic Will Be in Focus.
When Novo Nordisk reports earnings on Thursday, investors will be focused on sales of its blockbuster anti-obesity medicines, which have captured the cultural imagination over the past year.
Novo's (ticker: NVO) American depository receipt is up more than 40% this year on excitement over its weight-loss and Type 2 diabetes drugs. The company's market value has climbed to roughly $430 billion, making it one of the most valuable healthcare companies in the world.
Pope Francis to Attend COP28 Climate Change Conference in Dubai
ROME-Pope Francis said he would travel to the COP28 United Nations Climate Change Conference in Dubai next month, becoming the first pontiff to participate in such an event.
(MORE TO FOLLOW) Dow Jones Newswires
11-02-23 0114ET
