MARKET WRAPS

Stocks:

European stocks were higher on Wednesday, supported by Wall Street's rally, and despite the likelihood that Europe's major central banks will increase rates by more than the Federal Reserve in policy decisions later.

Analysts said investors have cheered the Fed's acknowledgement that inflation is falling and anticipate a coming pause in rate rises, expecting the cumulative effect of last year's increases to slow the U.S. economy sharply this year.

"Long story short, the market thinks the inflation job is done, even if the Fed hasn't arrived at that conclusion yet. Consequently, this goes a long way to explaining why U.S. markets closed strongly higher," CMC Markets UK said.

Stocks to Watch

Fresenius is expected to continue being affected by a challenging environment at Fresenius Medical Care, weakness in the Vamed healthcare-facility business, and higher interest and tax, Jefferies said.

This could push a 2023 outlook below consensus. In particular, higher interest could affect Fresenius's net income guidance for 2023.

"Although we expect Fresenius to continue to be affected by the current macro environment, net income could be dampened by higher financial charges and tax," Jefferies said.

Management is also expected to give updates on group structure and potential reorganization when the company reports results on Feb. 22, Jefferies added. This should be a driver of the share price.

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Merck KGaA's long-term outlook is attractive, but its near-term share price outlook less so, Citi said.

"We find it difficult to see the shares outperform ahead of phase-3 evobrutinib data in December," Citi said, referring to the company's potential multiple-sclerosis treatment.

Consensus estimates for Merck's earnings will likely be lowered on the back of increasing foreign-exchange headwinds, prolonged weakness for the semiconductor and display solution businesses, and an underappreciated margin impact from Covid-related sales decline in the life-science business, Citi said.

It has downgraded the stock to neutral from buy.

U.S. Markets:

Futures are mostly gaining, putting stocks on pace to extend Wednesday's post-Fed bounce.

Strong results from Meta Platforms sent its stock flying in off-hours trading, in turn buoying Nasdaq futures.

It will be another busy day of earnings, with Eli Lilly, Honeywell, Alphabet, Amazon and Starbucks all scheduled to report.

Forex:

The dollar edged down, with Commerzbank saying Jerome Powell struggled to sound convincing about the Fed's resolve to fight inflation at Wednesday's policy meeting.

Currency traders seized every suggestion that the Fed was relaxing its stance, Commerzbank added.

"It made little difference that the Fed chair repeated over and over again that there would be further rate hikes and that there would probably be no rate cuts this year."

Fed-induced dollar volatility is likely to continue for some time as the Fed and markets disagree over the timing of rate cuts, Commerzbank said.

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The euro looks set to rise as the ECB is expected to raise interest rates by 50 basis points and signal further rate increases at Thursday's meeting, UniCredit Research said.

Christine Lagarde could sound "hawkish" again, reiterating the need for more policy tightening to curb inflation even as data on Wednesday showed inflation eased in January, UniCredit added.

"Tones of this type are set to convince investors to break further above [EUR/USD] 1.10, with 1.12 the next target on charts as a medium-term reference."

UOB Global Economics & Markets Research said EUR/USD may breach resistance at 1.1120, based on technical charts.

On Wednesday, the currency pair broke above its prior resistance level of 1.0930 and rose beyond the top of its weekly Ichimoku cloud for the first time since June 2021.

EUR/USD's movements have improved its technical outlook further, with UOB continuing to expect the currency pair to advance. However, it remains to be seen whether the 2022 high of 1.1495 is within reach over the next few months UOB added.

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Sterling hit a one-month low against the euro before Thirsday's rate decisions.

The ECB should increase rates by 50 basis points and reiterate the need to stay the course in policy tightening, arguably making it "the most hawkish G20 central bank," Vantage said.

The BOE is expected to lift rates by 50bp, although it could adopt a more cautious tone given receding inflation expectations and a slowing housing market, Vantage added. Some analysts see a risk of a smaller 25bp rise.

Read Pound's Losses May be Limited Even if BOE Lifts Rates By Less Than Forecast

Bonds:

Eurozone government bond yields were lower after the Fed slowed the pace of rate rises with a 25bp increase.

While the Fed intends to continue rate rises, it has given signals that it is approaching the end of the rising cycle, analysts said.

"The Fed made no attempts to push back against market pricing and the main message was that they are now data-dependent and more optimistic about inflation. This supports that the Fed is near the end of its hiking cycle," SEB said.

Energy:

Oil prices rose around 0.7%, helped in part from a weaker dollar.

Metals:

Metals prices in London made solid gains as the dollar extended its post-Fed losses.

Silver vs Gold

Silver has sharply outpaced gold's gains in the past three months, and its classification as both an industrial and precious metal may lead it on a path to even higher prices.

From Oct. 31 to Jan. 31, Comex silver futures climbed nearly 25%, outpacing gold's almost 19% climb, a "statistically unusual amount that shows the precious metals market is bullish on global economic growth in 2023," DataTrek Research said.

Read more here .

DOW JONES NEWSPLUS


EMEA HEADLINES

ECB and Bank of England Set to Top Fed With Bigger Rate Hikes

Europe's major central banks are set to increase interest rates by more than the Federal Reserve's move on Wednesday.

The European Central Bank and the Bank of England are both expected to lift their benchmarks by a half point, compared with the Fed's quarter-point rise yesterday.


Deutsche Bank Profit Rises on Booming Lending Business

Deutsche Bank AG's net profit rose in the fourth quarter on the back of higher interest rates and a tax gain, driving the lender to post its strongest year since 2007.

However, the fourth-quarter pretax results missed analysts' expectations as the investment-banking performance disappointed. Deutsche Bank shares fell as much as 4% Thursday in German trading, though remained up around 40% over the past six months.


Shell Posts $42 Billion Profit, Adding to Industry's Record Haul

LONDON-Shell PLC became the latest oil giant to post a record annual profit last year, joining American peers in surging back from early pandemic losses on soaring energy prices.

Shell's $41.6 billion full-year profit surpassed the London-based company's previous record of $31.4 billion in 2008, measured on a net current-cost-of-supplies basis-a figure similar to the net income that U.S. oil companies report.


KKR Makes Bid for Stake in Telecom Italia's Fixed-Network Assets

Telecom Italia SpA said Thursday it has received a nonbinding offer from KKR & Co. for a stake of a new entity that would house the Italian telecommunications company's fixed-line network management and infrastructure assets.

The company said the offer is for a stake to be defined, but on the understanding that the acquisition would result in the loss of vertical integration in relation to the company. No terms other for the offer were disclosed.


Roche 2022 Sales Grew, But Expects 2023 Decline on Covid-19 Products

Roche Holding AG reported sales growth in 2022, but said it expects a decrease in sales for 2023 due to a drop in the sale of Covid-19 products.

The Swiss pharma major posted sales of 63.28 billion Swiss francs ($69.65 billion) for the full year 2022, up from CHF62.80 billion in 2021 and in line with consensus expectations. Net profit declined to CHF13.53 billion from CHF14.94 billion the year prior, missing analysts' expectations of CHF15.09 billion.


Infineon 1Q Revenue Increased Amid Strong Automotive, Industrial Demand - Update

Infineon Technologies AG on Thursday posted higher revenue and profit for its fiscal first quarter as strong chips sales in the automotive and industrial segments offset weaker demand for smartphones, computers and data centers.

The German chip maker said revenue for the three months ended Dec. 31 climbed to 3.95 billion euros ($4.34 billion) from EUR3.16 billion the prior-year quarter. Infineon's automotive segment contributed EUR1.87 billion to the total.


Germany's Trade Balance Fell Slightly on Month in December as Exports Declined Sharply

Germany's trade surplus fell in December compared with the previous month as both exports and imports declined sharply, reflecting continued weakness in global demand and lower energy prices.

The country's adjusted trade surplus-the balance of exports and imports of goods-fell to 10.0 billion euros ($10.99 billion) in December from EUR10.9 billion in November, data from the country's statistics office Destatis showed Wednesday.


Santander Sees Higher Profitability in 2023

Banco Santander SA said Thursday that it expects higher profitability in 2023 after the bank reported a broadly flat net profit for the fourth quarter.

The Spanish lender said it is targeting double-digit revenue growth and a return on tangible equity-a key measure of profitability-above 15% in 2023.


ABB 4Q Net Profit Fell, Orders Declined

ABB Ltd said Thursday that its net profit declined in the final quarter of 2022 as orders declined.

The Swiss technology group said it made $1.13 billion in net profit for the fourth quarter compared with $2.64 billion for the prior-year period on revenue that increased 3% to $7.82 billion.


Publicis Reports 9.4% Organic Revenue Growth for Fourth Quarter

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02-02-23 0559ET