By Geoffrey Smith
Investing.com -- The dollar fell to its lowest in nine months on rising expectations that the Federal Reserve will revert to mini-rate hikes at its next meeting. Hedge fund Elliott has built a big stake in Salesforce but says it wants to work with existing management. Rival hedge fund Citadel made a record-breaking profit last year. Synchrony is up premarket after an earnings beat but the rest of the calendar is pretty thin. Germany signals it's willing to let others deliver the Leopard 2 main battle tank to Ukraine as aid, but still isn't ready to do so itself. And crude oil makes a solid start to the week as speculative momentum builds and new sanctions on Russian diesel exports loom. Here's what you need to know in financial markets on Monday, January 23.
1. Dollar hits nine-month low with rate differentials set to narrow
The dollar fell to a nine-month low on market expectations that the Federal Reserve will only raise interest rates by 0.25 percent when it meets next week.
With the European Central Bank still signaling at least one more hike of 50 basis points, the interest rate differential between the euro and the dollar is set to narrow over the next six months. The ECB’s policy-making council also meets next week.
The euro rose as high as $1.0927 before retracing after the Deutsche Bundesbank said the German economy likely stagnated in the fourth quarter. Comments from Greek central bank governor Yannis Stournaras urging “more gradual” rate hikes also capped the euro’s gains.
2. Elliot targets Salesforce as Citadel makes history
Salesforce (NYSE:CRM) stock rose over 4% in premarket trading to a seven-week high after reports saying that hedge fund Elliott has taken a substantial stake in the software provider.
The Wall Street Journal quoted Elliott managing partner Jesse Cohn as saying that the group is looking forward to “working constructively with Salesforce to realize the value befitting a company of its stature.”
Salesforce is one of a number of Big Tech companies to have recently been jolted into major cost-cutting by a revenue slowdown. The stock is up nearly 20% from its December lows but is still trading at only half its peak value.
Elliott wasn't the only hedge fund making headlines over the weekend: new research suggested that Ken Griffin's Citadel had made the biggest profit of any hedge fund in history last year with a gain of $16 billion.
3. Stocks set for quiet opening; Synchrony up after earnings beat
U.S. stocks are set for a quiet opening to the week, in the absence of any major market-moving data and with the Lunar New Year also depressing trading volumes out of Asia.
By 06:30 ET, Dow Jones futures were effectively unchanged, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.
The earnings calendar is also relatively thin, with Synchrony Financial (NYSE:SYF) – formerly GE Capital – first out of the gate with a 10% earnings beat. Synchrony stock rose over 3% in premarket in response.
Oilfield services company Baker Hughes (NASDAQ:BKR) is also due to report early, with Zions (NASDAQ:ZION) and Brown & Brown (NYSE:BRO) due to report after the bell.
4. Germany signals movement on tanks for Ukraine, rails with France against Biden's IRA
Only two days after blocking such a move, Germany signaled it wouldn’t stop other European nations sending modern Leopard 2 battle tanks as military aid to Ukraine.
Foreign Minister Annalena Baerbock said that Germany still isn’t ready to send tanks from its own tanks, but added, “If we were asked, we would not stand in the way.”
Baerbock was speaking at a weekend meeting between the French and German governments which also resulted in the two countries complaining again about the Biden administration’s Inflation Reduction Act, which they say discriminates against European companies.
5. Oil up as speculative bets gain steam
Crude oil prices made a strong start to the week as the market focused on new G7 sanctions that are set to come into force on Russia in the coming days. The U.S., Europe, and Japan are all set to ban imports of diesel from Russia, in an effort to further reduce the Kremlin’s revenue stream for conducting its war in Ukraine.
Additionally, the prospect of rebounding Chinese demand has reignited speculative buying, as evidenced by the 7% gain in crude last week. The CFTC’s Commitments of Traders report showed speculative long interest in crude hitting a nine-week high as of Tuesday.
By 06:45 ET, U.S. crude futures were up 0.5% at $82.08 a barrel, while Brent futures were up 0.6% at $88.17 a barrel.