ASX 200 futures flat, S&P 500 edges higher, Uranium stocks to extend gains

ASX 200 futures are trading 5 points higher, up 0.06% as of 8:30 am AEDT.

S&P 500 SESSION CHART

MARKETS

• S&P 500 marginally higher but off session highs of 0.46%
• S&P 500 and Nasdaq logged weekly gains of 1.9% and 3.1% after a two-week losing streak and a sluggish start to 2024
• Treasury yields eased after US PPI unexpectedly declined in December, the US 2-year yield marked its lowest close since 17 May 2023
• Bullish focus points for the week – QT tapering talk, disinflation momentum, growing soft-landing expectations, AI proliferation with Nvidia shares up more than 10% last week, low bar into Q4 earnings season
• Bearish focus points for the week – Fed policymakers pushing back against aggressive rate cut expectations priced by markets, geopolitical tensions, stretched sentiment and positioning metrics, EV space under scrutiny
• Latest flow data suggest investors ignoring inflation risk red flag in March Fed rate cut expectations (Bloomberg)
• US presidential race sparks market speculation as investors brace for potential fiscal shifts, policy change (Reuters)

STOCKS

• Tesla to suspend most car production at its sole European factory for two weeks over Red Sea supply disruptions (Reuters)
• Tesla cuts Model 3, Model Y prices in China (Bloomberg)
• Burberry issues profit warning after experiencing further deceleration (Reuters)

EARNINGS

This header makes a return as the US kicks off Q4 earnings season – The market is expecting Q4 S&P 500 earnings to rise 1.3% year-on-year.

JPMorgan (-0.7%): Double beat, FY24 net interest income topped market expectations, rate cuts flagged as a headwind in 2024. Its net interest income forecast is based on six rate cuts in 2024.

• CFO on consumer: "In terms of consumer resilience … the way we see it, the consumer is fine. All of the relevant metrics are now effectively normalised.”

Bank of America (-1.1%): Beat earnings but missed revenue expectations, hit by a pretax charge of US$1.6 billion as well as a special US$2.1 billion fee charged by the FDIC.

• CEO on consumer: "The consumers of Bank of America have had access to credit and are borrowing responsibly. The balance sheets are generally in good shape and while impacted by higher rates, remember, many of them have fixed-rate mortgages and remain employed. So they've shown great resilience.”

Wells Fargo (-3.3%): Double beat, warned that its FY24 net interest income could come in below FY23 due to lower deposit and loan balances, earnings were lowered by a $969 million charge from severance expenses.

• CEO on credit quality: "We are closely monitoring credit and while we see modest deterioration, it remains consistent with our expectations.”

Delta Airlines (-8.9%): Double beat, year two of the company’s three-year plan ended with record quarterly revenue and traffic, consumer remains strong with travel spending outpacing GDP, tech travel is a laggard, leisure travel has been strong.  

CENTRAL BANKS

• Fed's Mester says its premature to consider cutting rates in March (Bloomberg)
• BOJ officials weigh downward revisions to economic growth and inflation forecasts at upcoming policy meeting (Bloomberg)
• Sources say BoJ expected to stick with inflation forecast at January meeting, keep ultra-loose policy settings unchanged (Reuters)
• Lagarde says ECB to cut rates when certain inflation set for 2% (Bloomberg)
• PBOC forecast to cut lending rate by 10 bps and add liquidity (Bloomberg)

GEOPOLITICS

• US, UK launch airstrikes on Houthi rebel targets in Yemen (FT)
• China-related tensions escalate ahead of Taiwan's general elections in potential pivotal moment (Reuters)

ECONOMY

• China's consumer inflation contracts again in December to mark third consecutive month of deflation (Bloomberg)
• China new bank loans, aggregate financing, M2 money supply growth all miss consensus (Reuters)
• UK economy rebounded more than expected in November driven by growth in the services sector (FT)
• US producer prices unexpectedly fall, goods deflation seen persisting (Reuters)
  
  

US Producer Prices

US producer prices unexpected fell for a third month in December, marking the longest streak of declines since 2020 and raised bets on how aggressively the Fed will cut rates this year.

• Headline December PPI fell 0.1% month-on-month vs. consensus expectations of a 0.2% rise
• Headline PPI is up 1.0% year-on-year
• Goods prices were lower, with energy as a major drag
• Core PPI was flat month-on-month vs. expectations of a 0.2% increase
• Overall market sentiment continues to expect a first Fed rate cut in March

I was wondering why markets were so calm after the higher CPI print last Friday. This might be explained by the expectation or anticipation of a cool PPI print or investors looking past the data towards a further slowdown through higher rates.

The Gift That Keeps on Giving – Uranium

Uranium futures soared through US$100 a pound to a new 16-year high of US$104 last Friday.

The world's largest uranium miner – Kazatomprom – said on Friday it will likely miss production targets over the next two years amid shortages of sulfuric acid and construction delays.

This adds a list of recent supply challenges and demand tailwinds including:

• Last year's coup in Niger disrupted shipments to European reactors
• Major uranium miner Cameco Corp lowered its production targets due to operational challenges at its Canadian mines
• The US is seeking contractors to boost domestic production of a nuclear fuel known as high-assay low-enriched uranium
• UK said it plans to build another large-scale nuclear power plant

Will a Bitcoin ETF Mark Another Top?

Bitcoin prices are down around 13% since its brief US$49,000 peak on Thursday, 11 January. This is despite the launch of the spot Bitcoin ETF, which witnessed US$4.6 billion worth of trades on its debut last week.

The selloff marks an all too familiar situation of 'buy the rumour and sell the news'.

If Bitcoin's performance after previous watershed moments like the launch of Bitcoin futures back in December 2017 and Bitcoin futures ETF in October 2021 is another to go by ...