MARKET WRAPS

Stocks:

European stocks were firmer for a second straight session, as investors continued to buy stocks on the last trading day of April. Concerns lingered, however, about the prospects of U.S. interest-rate rises, the Ukraine war and Covid-19-related lockdowns in China.

"There's a sense of ebullience to round up a torrid month across global markets with a sea of green across Asia and positive momentum carrying forward to the European session," said Victoria Scholar, head of investment at Interactive Investor.

Economic Insight:

The shortage of materials in German manufacturing has eased slightly in April, according to the Ifo Institute. In its latest survey, 75.0% of companies complained about bottlenecks and problems procuring intermediate products and raw materials in April, down from 80.2% in March.

However, "it would be wrong to describe the situation as completely relaxed," said Klaus Wohlrabe, head of surveys at Ifo. In addition to the war in Ukraine, China is a growing cause for concern, he said.

Computer manufacturers have been hit the hardest by material shortages, with 91.9% reporting problems. In the automotive industry, 89.1% of the companies reported problems. "Right now, there are no signs that there will be substantial relief in the coming months."

U.S. Markets:

Stock futures were lower, with tech stocks set to lead the way south after disappointing results from Amazon.com and Apple.

Investors are awaiting key inflation data, as well as more results from major energy companies such as Exxon Mobil.

Tech stocks, whose earnings have dominated the week, are expected to drive much of the action Friday. Apple stock fell in late trading after the tech giant topped earnings and set a revenue record, but warned of billions in added costs from supply-chain woes.

And Amazon.com reported its first loss in seven years and executives said it would look to cut costs. Those shares also fell in late trading.

On the heels of Thursday's weak U.S. growth data, investors will get an update on the Federal Reserve's favored inflation gauge - the core personal consumer expenditure price index for March, along with personal income and consumer spending. That will be followed by the University of Michigan consumer sentiment index for April.

The data will be scoured as investors gear up for next week's two-day Fed meeting, which many expect will conclude with a 50 basis-point interest-rate increase.

Forex:

The dollar was paring strength after Thursday's massive rally, with the euro and pound both clawing back lost ground, though the yen continued to slide.

The dollar was 0.4% lower against a basket of currencies and ING said the DXY Index "may be due some consolidation under 104 given that technical indicators are registering some very overbought readings." However, the combination of prospects of Fed interest-rate rises and safe-haven demand will soon bring in buyers.

"There will be lots of dollar buyers ready on dips and looking to position for a summer dollar rally as the Fed slams on the monetary brakes," ING said.

Separately, ING said the Eurozone's April inflation data could exceed expectations and draw out the European Central Bank "hawks" who favor policy tightening, but this may not offer much support to the euro.

The eurozone money market has already priced in 87 basis points of interest rate rises this year, which has done little to help the euro. "And there is a case to be made that in the event of an abrupt shut-off in European gas, the ECB will struggle to deliver more than a 50bp rate hike--effectively normalising the deposit rate to zero," ING said.

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UniCredit Research said sterling has scope to extend its recent depreciation against the dollar as the Bank of England may fail to deliver on the market's interest rate-rise expectations.

The steady GBP/USD erosion suggests that there is room for a further drop, potentially below 1.20, "especially if there are only a couple of rate hikes by the BOE in the pipeline for this year, which is what we expect, against a forward curve still pricing in a peak rate of close to 2.50%."

Read: Eurozone Inflation Rises to 7.5% in April

Bonds:

Italian 10-year government bonds have avoided supply pressure ahead of the coming 10-year BTP auction, outperforming their eurozone peers. Eurozone government bonds traded firmer early Friday, with the 10-year BTP yield falling 6.5 basis points to 2.675%.

The decline in 10-year bond yields was less elsewhere, with the 10-year Bund yield down 3 bps at 0.874%, the 10-year French OAT yield down near 4 bps at 1.376%, and the Spanish 10-year bond yield down more than 5 bps at 1.870%.

Italy's auction offer includes the launch of a new December 2032-dated BTP, and the tap of the April 2027 BTP and October 2030 floating rate notes.

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Citi said the spread between 10-year Italian and German government bond yields could breach 200 basis points in the coming months as markets price in the approaching end of the ECB's net asset purchases.

"We believe the recent widening is part of repricing of EGB [eurozone government bond] spreads as the ECB gets to net zero asset purchases, but the process is far from concluded," said rates strategist Aman Bansal.

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Spreads of eurozone peripheral government bond yields over Bunds have been back in a clear widening trend since the beginning of April, said DZ Bank, adding that the likelihood of an ECB rate rise soon is expected to push up the borrowing costs of eurozone countries.

"The current difficult backdrop is creating high spread risks, particularly in the peripheral countries," DZ's analysts say.

Energy:

Oil prices pushed higher in Europe after Germany dropped its opposition to a Russian oil embargo, opening the way to an EU-wide ban.

Crude's gains remained muted, however, as fears over Chinese lockdowns continue, said Wood Mackenzie. "Oil market volatility is set to continue, with the potential for more widespread and prolonged lockdowns into May and beyond, skewing the near-term risks for China's oil demand--and prices--to the downside."

Commodities:

Gold futures were more than 1% higher in early European trading, with concerns over energy security in Europe helping to firm up demand for safe-haven assets.

Rising oil prices too have helped to boost sentiment for the precious metal, although some traders are wary of having too much exposure to gold within their portfolios.

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Base metals were higher in London, as supply concerns narrowly outweighed the lack of demand from Asia.

Supply concerns have been prevalent recently, with local protests in Peru halting mining operations at the Las Bambas copper mine. Aluminum stocks on the LME fell Thursday to their lowest level since 2005. That said, any major gains are still being dampened by a lack of demand.

"Covid-19 mass testing in Shanghai and Beijing is disrupting economic activity, while liquidity tightening is another headwind for demand," said ANZ Research.

DOW JONES NEWSPLUS


EMEA HEADLINES

Eurozone Inflation Rises to 7.5% in April

The eurozone's annual rate of inflation rose again in April, stabilizing at its highest level in history.

Consumer prices rose 7.5% on year in April after climbing 7.4% in March, according to a first estimate released Friday by Eurostat, the European Union's statistics agency. Economists polled by The Wall Street Journal had forecast eurozone inflation at 7.5% in April.


Henkel Shares Tumble After Cutting 2022 Earnings Margin Outlook

Henkel AG shares dived Friday after it said it expects a lower earnings margin this year, as raw-material prices surge on the war in Ukraine.

Shares were down 8.0% to EUR58.12 at 0730 GMT.


OMV 1Q Profit Fell After Russia Business Hit; Cuts 2022 Production Outlook

OMV AG said Friday that profit fell in the first quarter as the company took a hit from its businesses in Russia, and cut its production outlook for the full year.

The Austrian oil-and-gas company posted a quarterly net profit of 546 million euros ($573.3 million) compared with EUR654 million a year earlier. On an adjusted basis, net profit came in at EUR1.07 billion.


German Economy Grew 0.2% in 1Q

The German economy posted an expansion for the first quarter despite Russia's invasion of Ukraine taking a toll on manufacturing activity and private consumption in March as energy prices jumped and supply-chain disruptions deteriorated.

Germany's gross domestic product rose by an adjusted 0.2% from the previous quarter, according to a first estimate published Friday by the country's statistics office. Economists polled by The Wall Street Journal had forecast a 0.1% expansion.


NatWest 1Q Profit Rose Ahead of Views Amid Higher Interest Rates

NatWest Group PLC said Friday that first-quarter pretax operating profit rose ahead of market expectations, boosted by higher interest rates.

The U.K. bank posted a pretax operating profit of 1.25 billion pounds ($1.56 billion) compared with GBP885 million for the year-earlier period. It was expected to fall to GBP755 million, according to the lender's compiled consensus.


BBVA 1Q Profit Rose Above Views on Higher Revenue, Lower Provisions

Banco Bilbao Vizcaya Argentaria SA said Friday that it posted its highest recurring quarterly profit ever, beating expectations on the back of increasing revenues and lower provisions.

The Spanish lender posted a net profit of 1.65 billion euros ($1.73 billion), a 36% increase compared with the EUR1.21 billion a year earlier. Analysts expected BBVA to report a profit of EUR1.24 billion, according to a consensus forecast provided by the bank.


Remy Cointreau Sees Strong Start to FY 2023 Despite Lower 4Q Sales

Remy Cointreau SA on Friday confirmed its profit expectations for fiscal 2022 and said it is confident of a strong start to the new year, as sales declined by less than expected in the final quarter.

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04-29-22 0554ET