MARKET WRAPS
Stocks:
European stocks traded higher on Friday as weaker U.S. economic data spurred hopes for the Federal Reserve to cut rates this year.
While the consensus forecast remains that the Fed will deliver one more rate rise of 25 basis points in May, there are no more increases expected thereafter, Interactive Investor said.
"Indeed, some are projecting that interest rate cuts could follow before the end of the year, depending on the severity of the recession which is expected to follow, although this is not currently the Fed's base case."
Read US Labor Market Probably Still Too Tight for the Fed's Liking
Focus will also be on U.S. bank earnings, with updates ahead of the opening bell from JPMorgan, Citigroup and Wells Fargo. BlackRock will also report ahead of the bell.
Stocks to Watch
RBC Capital Markets said Puma should book continued revenue momentum in the first quarter, and margin erosion should be mitigated by channel and regional mix, while Adidas's gross margin is likely to be weighed amid the end of the Yeezy line and higher costs.
Read Puma Set to Keep Pace at 1Q
Read Adidas Braced for Margin Drag at 1Q
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Standard Chartered's current valuation doesn't reflect the return potential of the company, Jefferies said.
The bank's 22% share price pullback since March seems harsh in the context of favorable operating trends, the U.S. bank said.
"One potential near-term explanation, as investors reassess thoughts on banks given the regional bank failures in the U.S., is that STAN's deposit base is more corporate weighted which could exhibit pressure given mix shift to term deposits and higher deposit betas."
The pullback in shares offers an opportunity for scaling existing positions or new money, it said.
Jefferies rated the stock buy and lifted its price target to 1,000 pence from 950 pence.
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U.S. Markets:
Stock futures were lower ahead of a slew of bank earnings and retail-sales data.
Retail sales are expected to have declined in March, offering further evidence that the economy is cooling.
Stocks in the News
Boeing fell 4% in premarket trading after the company halted deliveries of its 737 MAX jet after the discovery of a parts compliance problem from a supplier.
Read Boeing Pauses MAX Deliveries After Parts Problem
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Forex:
An emerging divergence in monetary policy between the Fed and ECB makes the euro more attractive than the dollar, Commerzbank said.
Even if the ECB's determination to fight inflation is likely to falter soon, the Fed and ECB are in different phases of their interest-rate raising cycles, Commerzbank added.
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The dollar fell as weaker U.S. producer prices data Thursday supported expectations for the Fed to cut interest rates later in the year.
"Just like the U.S. consumer price inflation data the day before yesterday it confirmed that the situation on the inflation front is improving," Commerzbank said.
From the market's perspective, conditions for Fed rate cuts in the second half of 2023 have therefore been met, it added.
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Bank of England chief economist Huw Pill said Thursday that the U.K. may be experiencing a positive demand shock from low unemployment supporting consumption, and this should help sterling, ING said.
Pill's comments suggest he may not be considering a pause in the BOE's interest rate-rise cycle, it added.
"Here financial markets now price an 80% chance of a 25 basis points BOE hike on May 11."
Bonds:
Eurozone long-end government bond yields are expected to move back and forth within a limited range, at least compared with prior weeks, until the next inflation report on May 2, with the risk skew tilted toward higher yields, UniCredit Research said.
The inflation report comes two days before the next ECB policy meeting on May 4.
"To make matters even more interesting, the ECB will also release its bank lending survey on 2 May," Unicredit said.
Read Eurozone Government Bond Spreads Seen Rangebound With Lower Volatility
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The market pricing of ECB interest rates is back to levels what Citi's strategists see as fairer levels, and likely sticky on the downside, giving a slight upward room for Bund yields.
"[This is] helping to inform a slight bearish bias for Bunds to 2.5%," Citi said.
Citi sees prospects for a larger selloff as diminished, however, it expects the 2023 range to hold with the 2.75% peak for 10-year Bund yields intact.
A larger sell-off looks unlikely, because "there is already tentative de-coupling between near-term hike prospects and long-term yields...and we expect this to continue," Citi added.
Energy:
Oil prices drifted lower in Europe, with uncertainty over both supply and demand since the start of the month.
"The supply side should remain broadly price supportive over the remainder of the year, with OPEC+ maintaining strict curbs on its supply, the Iranian nuclear deal slipping further out of reach and the U.S. shale sector under mounting pressure," Fitch said.
However, a macroeconomic slowdown is hitting oil demand at the same time, Fitch added, expecting an average price of $85 a barrel this year, down from $99 a barrel in 2022.
Read Saudi-Led Oil Cuts Risk Fueling Inflation and Harming Global Economy, IEA Says
Metals:
Base metals prices pushed higher while gold kept steady, as investors looked toward risk assets such as commodities.
"Risk appetite returned to markets over the last 24 hours, aided by some weak U.S. data that supported expectations the Fed might soon call it a day on their rate hikes," Deutsche Bank said.
Leading indicators are pointing to a mild recession in the U.S. this year which should mean a pullback in monetary tightening from the Federal Reserve, aiding assets such as commodities, Deutsche Bank added.
Silver
Silver prices are set to remain high this year as a weakening dollar and possible cuts in interest rates from the Fed boost appeal for precious metals. UBS forecast silver to reach $29 by December.
"Silver has been the best-performing precious metal of late. Since the pullback in early March, the metal's price is up around 30%," UBS said, adding that gold by comparison has risen 12% in this time.
Steel
A rise in China's net steel-product exports reaffirms concerns that steel demand in the world's second-largest economy may already be fading, Commonwealth Bank of Australia said.
"It will be challenging for China's net steel-product exports to remain elevated through 2023," though, "given our expectations that the global economy will continue to slow," CBA said.
China's net steel-product exports rose by 30% on-month and 83% on-year in March, to the highest level since September 2016.
DOW JONES NEWSPLUS
EMEA HEADLINES
Saudi-Led Oil Cuts Risk Fueling Inflation and Harming Global Economy, IEA Says
The oil market will fall into a far larger oil deficit sooner than expected following surprise production cuts from some of OPEC's leading members, the International Energy Agency said Friday.
The gaping hole in the global oil market between the availability of crude and rebounding demand will reach 2 million barrels a day by the third quarter of the year, the Paris-based energy watchdog said in a closely followed monthly report.
Hermes Keeps Pace Into 1Q as Tourism, Store Openings Boost Sales
Hermes International SCA said Friday that sales momentum continued into the first part of the year, propelled by increased tourism and new stores.
The French luxury fashion house, maker of Birkin handbags, booked sales of 3.38 billion euros ($3.73 billion) in the first quarter, rising 23% at constant currency from EUR2.77 billion in the same period last year. The pace of growth was the same as in the last quarter of 2022.
TomTom Shares Jump After Return to Profit in 1Q, Guidance Backed
Shares in TomTom NV rose up to 12.5% on Friday after the map maker posted a swing to net profit for the first quarter of 2023 as growth in its location technology's automotive business boosted its revenue.
At 0727 GMT, shares were up EUR0.58, or 7.5%, at EUR8.15.
Danske Bank Sees Forecast-Beating 1Q Profit, Raises Full-Year Guidance
Danske Bank AS late Thursday raised its full-year profit guidance and said it expects to report a forecast-beating first-quarter net profit as higher interest rates and high trading income helped boost earnings at the start of the year.
The Copenhagen-based bank said it now expects a net profit of between 16.5 billion and 18.5 billion Danish kroner ($2.45 billion-$2.74 billion) in 2023 compared with previous expectations of DKK15 billion-DKK17 billion.
French Inflation Revised Upward in March as Food Prices Keep Climbing
France's level of inflation eased less than first anticipated in March, as soaring food prices offset cooling energy prices.
The country's consumer price index was revised upward to 5.7% in the month, from a preliminary figure of 5.6%, data from the country's statistics office Insee showed Friday.
Ukraine War Creates Fertile Ground for Fertilizer Sellers
Potash, a potassium-based fertilizer mined from the ground, came into sharp focus last year when prices reached record highs following supply disruptions from Belarus and Russia. Some see it as a key commodity not just for agricultural production but also combating global warming.
Now potash producers elsewhere-most notably in Canada-are seeing an opportunity to grab market share. BHP, the world's largest miner, sees the fertilizer as one of the keys to its future. Will their potash bets pay off?
GLOBAL NEWS
As Bond Market Turbulence Eases, Companies Borrow Again
Trading in U.S. government bonds has become much less volatile in recent weeks, helping fuel a rebound in corporate borrowing after a chaotic stretch that followed Silicon Valley Bank's collapse in early March.
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04-14-23 0605ET
