In morning trading, December E-Mini S&P 500 futures (ESZ23) exhibit a rise of +0.35%, while Dec Nasdaq 100 E-Mini futures (NQZ23) show an increase of +0.32%.
Stock index futures are slightly higher this morning, drawing support from a Euro Stoxx 50 rally to a 3-1/2 month high. European stocks surged after Eurozone Nov CPI came in below expectations, contributing to a drop in the 10-year German bund yield to a 4-1/2 month low. This development fueled expectations that the European Central Bank (ECB) might conclude its interest rate hikes. U.S. stock index futures extended their gains following positive jobless claims and Oct core PCE reports.
In positive news for stocks, M&A activity has provided support, with AbbVie’s agreement to acquire ImmunoGen for $10.1 billion. Additionally, Salesforce, up more than +9% in pre-market trading, reported Q3 adjusted EPS above consensus and raised its 2024 adjusted EPS forecast. Snowflake also posted strong performance, up more than +8%, reporting Q3 revenue above consensus.
On the downside, Pure Storage is down over -16% after forecasting 2024 revenue below consensus. Okta is down over -3%, compounding Wednesday’s -2% loss after downgrades from Wells Fargo Securities and KeyBanc Capital Markets.
U.S. weekly initial unemployment claims rose +7,000 to 218,000, meeting expectations. However, weekly continuing claims rose +86,000 to a 2-year high of 1.927 million, indicating a weaker labor market than the anticipated 1.865 million.
U.S. Oct personal spending and personal income both rose +0.2% m/m, meeting expectations.
The U.S. Oct core PCE deflator, the Fed’s preferred gauge of inflation, eased to +3.5% y/y from +3.7% y/y in Sep. The Oct headline deflator also decreased to +3.0% y/y from +3.4% in September, beating expectations of +3.1% y/y.
Market expectations reflect a 4% chance of a +25 bp rate hike at the Dec 12-13 FOMC meeting and a 0% chance for the following Jan 30-31, 2024, FOMC meeting. Subsequently, a 46% chance is anticipated for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting, with a 100% chance for the same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields show mixed trends today. The 10-year T-note yield is up +3.7 bp at 4.292%, while the 10-year German bund yield fell to 2.395%, a 4-1/2 month low, down -0.2 bp at 2.430%. The 10-year UK gilt yield is up +5.4 bp at 4.150%.
Overseas stock markets are generally higher. The Euro Stoxx 50 is up +0.44%, China’s Shanghai Composite Index is up +0.26%, and Japan’s Nikkei Stock Index is up +0.50%.
The Euro Stoxx 50 hit a 3-1/2 month high today, driven by an easing of Eurozone consumer price pressures, reinforcing expectations that the ECB may halt interest rate hikes. Stronger-than-expected German Oct retail sales also contributed positively to stocks.
Swaps tied to ECB meeting dates indicate a 49% chance of a -25 bp rate cut at the March 7 meeting, fully pricing in a -25 bp rate cut at the April 11 ECB meeting.
Eurozone Nov CPI eased to +2.4% y/y, better than expectations, and Nov core CPI eased to +3.6% y/y. Germany’s Nov unemployment change exceeded expectations, rising by +22,000.
China’s Shanghai Composite rebounded from early losses, stimulated by speculation that weak economic growth would prompt Chinese government stimulus measures. Chinese robot-related stocks rallied after President Xi Jinping was seen observing a walking robot during his Shanghai visit.
Japan’s Nikkei Stock Index recovered from a 2-week low, aided by a weaker yen and a rally in exporter stocks. Dovish comments from BOJ board member Nakamura and a decline in government bond yields fueled a rally in technology stocks.
Japan’s Nov consumer confidence index unexpectedly rose +0.4 to 36.1, Japan Oct industrial production increased +1.0% m/m, while Oct retail sales unexpectedly fell -1.6% m/m.
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