MARKET WRAPS
Stocks:
European stocks continued to rally on Thursday, as investors cheered some strong corporate earnings, with the U.K.'s FTSE 100 hitting a fresh record high.
Investors have warmed to the FTSE's mix of low-valued blue-chips, many with exposure to revitalized sectors such as energy, mining and financials.
"It's all about opportunity, about the long haul, and sectors that might have been shunned just a few months ago are finding that investor interest has been rekindled," AJ Bell said.
Stocks to Watch
Shares in Pirelli rose almost 5% after media reports on Wednesday indicated that its largest shareholder, Chinese chemical company Sinochem, is considering a sale of its 37% stake.
Equita Sim said high debt levels at the tire maker could be a hurdle to a deal, and noted that Italian newspaper Il Messaggero reported that Sinochem would ask for a sale price of EUR6.50 a share.
"We have always considered more likely the placement of the 9% held by Silk Fund, but we do not rule out that these press sources are realistic knowing that Sinochem, after the merger with ChemChina, became a rather diversified conglomerate," Equita said.
U.S. Markets:
Stock futures edged higher ahead of several data releases that could provide further clarity about the economy.
Government bonds yields fell, with the two-year yield, which is more sensitive to near-term interest-rate expectations, at 4.6%, down from 4.625%.
January's producer-price index data, which generally reflects supply conditions, are due, along with the latest data on jobless claims and new residential construction.
Thursday will be a lighter day on the earnings front, with results scheduled from Hyatt Hotels and Bloomin' Brands before the opening bell. DraftKings will report after the market closes.
Forex:
The dollar was down around 0.3% against a basket of currencies, after rising strongly following the better-than-expected U.S. retail sales data.
The strong rise in January retail sales underlined that the economy has started the new year in a "much more robust manner" than expected and the Federal Reserve will have to raise interest rates more significantly than anticipated to bring inflation back to target, Commerzbank said.
"As long as the fall in inflation does not seem sufficiently certain, there is confidence the Fed will tighten its monetary policy and a weaker dollar seems less justified."
Commerzbank also said the euro has limited appreciation potential as market expectations appear in line with the European Central Bank's "hawkish" remarks about the need for further interest rate rises.
The market has fully priced in a further 25 basis points rate rise after March and tends to see further upside potential, Commerzbank said.
"The turnaround in sentiment in the U.S has also boosted the interest rate outlook in Europe." That seems justified as ECB speakers sound consistently convinced that the focus must remain on rate rises, Commerzbank added.
Bonds:
Eurozone government bond yields were slightly lower but the 10-year Bund yield is now near the upper end of its recent trading range, according to ING.
"Better data has boosted hawkish Federal Reserve and European Central Bank expectations. But this time, the back end of the curve has been lifted to a greater degree," ING said.
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Strong demand at recent French and Belgian 30-year government bond syndications "probably prompted Italy's decision to launch its second syndicated transaction this year," UniCredit Research said.
Italy hired banks on Wednesday for the launch of new October 2053-dated BTP and the transaction is likely to go ahead today, one day after Belgium issued EUR5 billion in June 2054-dated OLO. France's EUR5 billion May 2054 OAT was launched on Feb. 7.
That said, the launch of a new 30-year Italian BTP this quarter was in the cards, UniCredit Research said.
Energy:
Oil prices ticked higher as traders balanced mixed demand signals.
Hopes for a demand rebound in Asia was providing support to prices, while the outlook for demand in the U.S. seems more mixed, sapping some of the market's optimism.
Metals:
Base metals and gold made modest gains in early London trading, with investors looking ahead to key data points such as the U.S. PPI release and how it will affect Fed policy.
"PPI inflation usually plays second fiddle to monthly CPI data, but investors are laser-focused on inflation metrics and the implications for Fed policies. Today's PPI print matters," Peak Trading Research said.
DOW JONES NEWSPLUS
EMEA HEADLINES
Ukraine War to Take Sharp Economic Toll in Eastern Europe
Russia's war in Ukraine will cause a sharp slowdown in economic growth across Eastern Europe this year, deterring foreign investment and lifting energy prices and borrowing costs, the European Bank for Reconstruction and Development has warned.
Most of the European countries that are closest to the front line showed surprising resilience during the first year of the war. But many economies in the region are more reliant on energy-intensive factories than their counterparts in Western Europe and they could see their market share erode as their costs increase.
Airbus Boosts Wide-Body Production, Increasing Pressure on Boeing
Airbus SE is rapidly boosting production of its two biggest aircraft models, bringing rates close to prepandemic levels as it prepares to lure surging interest amid the recovery in international traffic.
The plane maker on Thursday said it would lift monthly production rates of its A350 flagship wide body from six a month to nine-just short of 2019 levels-by the end of 2025. Production of its smaller A330neo jet will rise from a rate of three a month now to four next year.
Nestle 2022 Profit Falls Short of Expectations; Sets out Guidance - Update
Nestle SA reported full-year profit and sales below expectations despite price increases to battle rampant inflation, and set out guidance for 2023.
The Swiss food-and-beverage company on Thursday said that net profit was 9.3 billion Swiss francs ($10.07 billion) compared with CHF16.9 billion the previous year when it made a gain on the disposal of L'Oreal SA shares and as its net profit margin decreased by 960 basis points to 9.8%.
Commerzbank 4Q Profit Topped Expectations After Higher Rates Boosted Revenue - Update
Commerzbank AG said Thursday that its fourth-quarter profit beat expectations, after revenue surged on higher interest income, and said it would ramp up its returns to shareholders in 2023.
Germany's second-largest lender said net profit in the three months to the end of December was 472 million euros ($504.5 million), up from EUR421 million in the same period of 2021.
Standard Chartered's Fourth-Quarter Profit Rose, Lifted by Higher Interest Rates
Standard Chartered PLC's fourth-quarter profit rose as higher interest rates boosted the bank's income and helped offset continued impairment pressure from its exposure to China's real estate liquidity crisis.
The London-based lender said Thursday that underlying pretax profit, which is adjusted for noncash items and exceptional or infrequent transactions, was $529 million, compared with a restated profit of $439 million in the year-earlier period.
Pernod Ricard's Pricing Power Drove 1H Growth; Plans Further Hikes Ahead - Update
Pernod Ricard SA isn't seeing any hit to its sales from rising inflation and lower consumer spending power, and plans to use further price increases to fuel its top line in the second half of the fiscal year.
Setting out results for the six months to Dec. 31, the French drinks group said Thursday that a strong pricing dynamic and a premium portfolio had helped it maintain sales growth at 12%, and to shore up its profit margins.
Renault to Pay 2022 Dividend, Eyes Margin Expansion This Year After 2H Profitability Climbed
Renault SA on Thursday said it is aiming to further increase its profitability this year as sales and operating earnings rose in 2022, though the group swung to a net loss as a result of its withdrawal from Russia.
Renault said it will pay a dividend of 25 European cents a share for the year, after two years without.
Insurer Fails to Block Cement Maker's Bankruptcy Plan Over Fraud Concerns
An insurance company has no legal standing to demand defunct cement maker Kaiser Gypsum Inc.'s bankruptcy plan include safeguards against fraudulent asbestos claims, a federal appeals court ruled.
The U.S. Court of Appeals for the Fourth Circuit ruled Truck Insurance Exchange failed to show its rights under insurance policies issued to Kaiser Gypsum were impaired in a chapter 11 plan for the cement maker's mass asbestos-injury liabilities.
GLOBAL NEWS
Ukraine War to Take Sharp Economic Toll in Eastern Europe
Russia's war in Ukraine will cause a sharp slowdown in economic growth across Eastern Europe this year, deterring foreign investment and lifting energy prices and borrowing costs, the European Bank for Reconstruction and Development has warned.
Most of the European countries that are closest to the front line showed surprising resilience during the first year of the war. But many economies in the region are more reliant on energy-intensive factories than their counterparts in Western Europe and they could see their market share erode as their costs increase.
Fundraising Slowdown Poses Big Hurdles for Emerging Firms
Private-equity professionals face a difficult environment for launching new firms as economic uncertainty weighs on overall fundraising and investors try to lower risk by backing established managers, panelists said at a WSJ Pro Private Equity event.
(MORE TO FOLLOW) Dow Jones Newswires
02-16-23 0556ET
