MARKET WRAPS
Watch For:
Consumer Credit for January; Jerome Powell presents Monetary Policy Report to U.S. Senate Banking Committee
Today's Headlines/Must Reads
China's Foreign Minister Says Ties With U.S. Risk Going Off the Rails
Chinese Exports Pull Back Again, Hampering Post-Covid Recovery
Sustainable Funds Dodged Outflows in 2022 Market Rout
Inner Workings of Fox News on Display in Defamation Case
Salesforce Strives to Make Sales Force More Efficient
Rising Rates Squeeze Small Town Borrowers
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Opening Call:
Stock futures were a touch firmer on Tuesday, though trading was muted ahead of testimony by Jerome Powell.
Markets remain focused on the prospects for monetary policy and consequently trading is muted ahead of Powell's testimony to the Senate, due to commence at 10 a.m. Eastern.
Powell will also be quizzed by the House on Wednesday, ahead of the always eagerly awaited official jobs data on Friday.
"Investors are largely unwilling to take the plunge ahead of two vital indicators...with most markets treading water in the meantime," Interactive Investor said.
"...Powell's Congressional testimony and the nonfarm payrolls report are the undoubted highlights of the week. Taken together, the two events will provide the latest update on the immediate past, present and future of the world's largest economy and will be crucial in determining market sentiment," Interactive Investor added.
Some analysts are wary that the market is still vulnerable to any confirmation that interest rates may have to rise at a faster pace than hoped.
"For the most part, Fed speak recently has been chiefly hawkish; there has been no significant deviation from the 25bps path yet. But any such material twist would likely boost the USD higher and risk sentiment significantly lower," SPI Asset Management said.
Global markets were mixed. The Stoxx Europe 600 rose 0.3%, pushed up by shares of retailers and real-estate companies.
In Asia, Japan's Nikkei 225 rose 0.3% while Chinese stocks fell. The Shanghai Composite Index lost 1.1% after trade data showed Chinese imports and exports both fell in the first two months of the year, complicating Beijing's efforts to juice the economy.
Stocks to Watch
ADial Pharmaceuticals received confirmation for a type C meeting with the FDA, which may lead to the regulatory approval of its alcohol use disorder treatment AD04. Shares rose 83% in after-hours trading.
Calavo Growers said it was exiting its non-core salsa business to reduce costs after reporting a significantly wider loss in its latest quarter. Shares dropped 12% in after-hours trading.
Grindr shares were down over 10% premarket after it reported a drop in net income.
Meta is set to lay off thousands more employees, according to a Bloomberg report. This comes after it slashed 13% of its workforce four months ago.
Rivian was down 6% premarket. It said it plans to sell $1.3 billion in convertible notes in a private offering.
ThredUp said it expects to keep achieving revenue growth in 2023 after beating analysts expectations in its latest quarterly results. Shares rose 6% in after-hours trading.
Trip.com beat analysts' estimates on revenue and net income, fueled by easing Covid-19 restrictions in China. Its portfolio of companies includes Skyscanner.
Forex:
The dollar was little changed ahead of Powell's testimony, which will be important in determining whether the currency can continue rising, MUFG said.
Investors are looking for "clear signals" that Powell is considering adjusting his plans for only two more rate rises this year due to evidence of stronger economic activity.
If Powell remains cautious, however, "there could be some disappointment today that could trigger the dollar index to fall further below the 105.00-level," MUFG said.
Commerzbank said investors may be cautious about taking a strong position against the dollar ahead of the nonfarm payrolls report.
"Many market participants will still be apprehensive following the dollar's strong upside move four weeks ago after the surprisingly positive non-farm payrolls for January," Commerzbank said.
If the labor market doesn't show any signs of weakening despite past interest rate rises by the Federal Reserve, the market will bet on further rate increases and rates remaining at these levels for longer, supporting the dollar.
Read Sterling May Fall Vs Euro as ECB More Aggressive Than BOE
Energy:
Brent crude futures were unchanged in Europe, hovering around their highest level since mid-February, as investors sat tight ahead of Powell.
The appearance "is an opportunity for Mr. Powell to shape financial market expectations," UniCredit said.
"We expect Mr. Powell to reiterate that further rate hikes are needed and, if the data were to continue to surprise to the upside, the peak rate would likely need to be higher than the central bank had previously expected."
Metals:
Base metals were weaker in Europe, with gold little moved.
"Investors have been worried about the hawkish Fed's 'higher for longer' interest rate projections, which have strengthened the dollar over the past month--a structural headwind for our commodity markets," Peak Trading Research said.
It added that the market is pricing a 30% chance of a 50-basis-point hike but those odds are likely to shift after Powell's speech.
Gold
Gold has traditionally followed an inverse relationship with Treasury yields, but last year the relationship broke, with yields rising much more than gold fell.
However, the relationship was reestablished in the first two months of 2023, albeit with prices resetting at a higher level, Morgan Stanley said.
"For 2023, we need to consider both macro and demand-side factors, but the new trendline suggests gold is likely to be more reactive to changes in yields than it was in 2022."
Given that 10-year real yields aren't far off the highs seen in 2022, gold prices could rise to $2,160 a troy ounce from $1,849 an ounce today, if interest rates are cut later this year, Morgan Stanley said.
Cobalt
Cobalt prices are likely to remain under pressure as slowing production of electric vehicles cuts demand for key battery materials.
LME cobalt prices have slumped to $34,180 a metric ton from May 2022's peak of $82,000 a ton. Prices are likely to be capped due to slowing demand for EV batteries in China, while inventories of key materials are also high, Fitch said.
The market is pricing in flat growth for the rest of the year with the December 2023 contract closing at $36,751 a ton on Feb. 15, Fitch added.
Cobalt is likely to see further pressure as more firms adopt cobalt-free battery chemistries amid worries around ESG and mining in Congo.
TODAY'S TOP HEADLINES
Inner Workings of Fox News on Display in Defamation Case
On Jan. 5, 2021, the day before the U.S. Capitol riot, Fox News Chief Executive Suzanne Scott got an email from Rupert Murdoch saying it might be time for the network's prime-time hosts to declare Joe Biden had won the presidency.
Though the stakes were especially high, getting an editorial suggestion from the top brass was hardly unusual, according to court filings from a defamation suit against Fox News that reveal internal communications at the network.
Salesforce Strives to Make Sales Force More Efficient
In years past, Salesforce Inc. was a poster child of the tech sector's growth-at-any-cost strategy. The company is again trying to be the industry's vanguard-this time by becoming more streamlined and profitable.
As the business-software company faces slowing growth and more demanding investors, it is pivoting to focus on profit by cutting back on its number of employees and the amount of money it uses to close deals and take care of clients. Its shares surged 15% last week as it declared that its efforts were working, offering ambitious projections for revenue and profit margins.
How Lego Beat Barbie and Monopoly
Less than a decade ago, Lego A/S inched ahead of Barbie maker Mattel Inc. as the world's biggest toy company.
Today, the maker of those brightly colored bricks is generating almost twice the revenue of Mattel, outpacing both it and rival Hasbro Inc., maker of the Monopoly board game and Nerf guns, through the pandemic, recent supply-chain tumult and soaring inflation.
Traton Targets Higher Return on Sales in 2023 After 2022 Sales Top EUR40 Bln
Traton SE topped 40 billion euros ($42.74 billion) in sales in 2022, overcoming supply bottlenecks and elevated energy prices, as it targeted a higher return on sales in 2023 on a strong order backlog.
The truck and bus subsidiary of Volkswagen AG said Tuesday that sales were EUR40.34 billion in 2022, up 32% on year, with its adjusted operating result jumping to EUR2.07 billion from EUR1.60 billion.
Tyler Perry Expressed Interest in Buying Majority Stake of BET Media Group From Paramount Global
Actor and producer Tyler Perry has expressed interest in acquiring a majority stake of BET Media Group from Paramount Global, according to people familiar with the situation.
Mr. Perry and Paramount have had a longstanding relationship. The media mogul, who has his own production studio, has an overall deal to create shows for Paramount and also has a minority stake in Paramount's BET+ streaming service.
Chinese Exports Pull Back Again, Hampering Post-Covid Recovery
HONG KONG-The export engine that propelled China's recovery through much of the pandemic sputtered to start the year, complicating Beijing's efforts to juice an economy that is still reeling from three years of stringent "zero-Covid" restrictions.
Exports from the world's second largest economy fell 6.8% during the first two months of 2023 from a year earlier, extending a string of year-over-year declines stretching back to October, data from China's customs bureau showed Tuesday.
Sustainable Funds Dodged Outflows in 2022 Market Rout
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03-07-23 0616ET
