Stocks, news, flash PMI data, earnings

Defense manufacturer Rheinmetall raised expectations of increased wartime demand

in Germany Rheinmetall raised sales expectations for 2025, according to Chief Executive Armin Papperger.

The CEO told Stern magazine that he expects sales to grow to between 11 billion euros ($11.9 billion) and 12 billion euros by 2025, up from between 10 billion euros and 11 billion euros in November.

Rheinmetall has supplied Ukraine with the likes of air defense systems and military trucks for use in its fight against Russia, and is also involved in the production of the Leopard tanks currently requested by Ukraine.

Rheinmetall shares hit an all-time high in March 2022 and have remained high since Russia invaded Ukraine. Shares hit a session high of $226.50 at around 9:30 a.m. in London on Tuesday.

— Hannah Ward-Glenton

Flash PMIs: The UK suffered a sharp January decline in activity

In contrast to the apparent change in the euro zone’s business activity in January, flash PMI (purchasing managers’ index) readings from the UK Tuesday showed that the economy contracted at the highest rate in two years.

The S&P Global composite UK PMI, which covers services and manufacturing, fell to 47.8 in January from 49.0 in December, missing the 48.5 consensus forecast in a Wall Street Journal poll of economists.

S&P Global said widespread strike action, staff shortages, export losses, the cost of living crisis and sharply rising interest rates have all combined to depress economic activity.

– Elliot Smith

Flash PMIs: Euro zone business activity returns to growth in January

The euro zone economy returned to moderate growth in December, according to the new flash PMI (purchasing managers’ index) reading on Tuesday.

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The S&P Global euro zone composite PMI, which covers manufacturing and services activity, came in at 50.2 in January, up from 49.3 in December and ahead of the consensus forecast of 49.8.

The index surpassed the 50 mark, which separates expansion from contraction, for the first time since June.

The euro zone’s dominant services sector index rose to 50.7 from 49.8 in December, while the manufacturing index rose to 48.8 from 47.8, also beating forecasts but remaining in contractionary territory.

– Elliot Smith

Stocks on the move: Topdanmark up 3%, Ambu down 4%

Danish stocks were the biggest movers in both directions at Tuesday’s open.

Insurance company Topdanmark added 3.7% to lead the Stoxx 600 after its fourth-quarter earnings report and dividend proposal, while hospital equipment maker Ambu fell 4.6% after SEB cut the stock to “sell” from “hold.”

El-Erian says Fed should hike 50 basis points, calls small increase a ‘mistake’

Inflation has shifted from goods to the service sector, said Mohamed El-Erian

The surge in inflation may be seen by many in the past, but the move to a 25 basis point increase at the next Federal Reserve policy meeting is a “mistake,” according to Allianz Chief Economic Adviser Mohamed El-Erian.

“‘I’m in a very small camp that thinks they shouldn’t downshift 25 basis points, they should do 50,'” he said on CNBC’s “Squawk Box” on Monday. “They have to take advantage of this growth window that we’re in, they have to take advantage of where the market is, and they have to try to tighten financial conditions because I think we still have an inflation issue.”

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Inflation, he said, has shifted from goods to the service sector, but could rise again if energy prices rise with China’s reopening.

El-Erian expects inflation to rise to 4%. This, he said, will put the Fed in a difficult position whether they should continue to crush the economy to reach 2%, or promise that level in the future and hope that investors will tolerate a steady 3 % to 4% nearer term.

“That’s probably the best outcome,” he said of the latter.

— Samantha Subin

CNBC Pro: Wall Street is excited about Chinese tech — and in love with a mega-cap stock

After more than 2 years of regulatory crackdowns and a pandemic-induced slump, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as one you are the leading choice for many.

Pro subscribers can read more here.

— Zavier Ong

The Fed is likely to discuss next week when to stop the hikes, the Journal report said

Federal Reserve officials next week are almost certain to approve another cut in interest rate hikes while also discussing when to stop all hikes, according to a Wall Street Journal report.

The rate-setting Federal Open Market Committee is scheduled to meet Jan. 31-Feb. 1, with markets pricing in a nearly 100% chance of a quarter-point increase in the central bank’s benchmark rate. Most prominently, Fed Governor Christopher Waller said Friday that he sees a 0.25 percentage point increase as the preferred measure for the upcoming meeting.

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Still, Waller said he doesn’t think the Fed is done tightening, and several other central bankers in recent days have backed that idea.

The Journal’s report, citing public statements from policymakers, said slowing the pace of hikes would provide an opportunity to gauge what impact the hikes so far have had on the economy. The series of rate hikes that began in March 2022 resulted in an increase of 4.25 percentage points.

The market price currently indicates a quarter-point increase in the next two meetings, a period of no action, and then up to a half-point decrease by the end of 2023, according to CME Group data.

However, several officials, including Governor Lael Brainard and New York Fed President John Williams, used the expression “stay the course” to describe the future path of policy.

— Jeff Cox

European markets: Here are the opening calls

European markets headed for a positive open Tuesday ahead of flash PMI (purchasing managers’ index) data for the euro zone in January.

The UK FTSE 100 index is expected to open 10 points higher at 7,801, in Germany DAX 18 points higher than 15,122, France’s CAC rose 12 points to 7,049 and in Italy FTSE MIB increased by 81 points to 25,945, according to data from IG.

No major earnings were released Tuesday.

— Holly Elliott

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