MARKET WRAPS

Stocks:

European stocks traded mostly lower on Tuesday as investors looked ahead to the Federal Reserve's interest rate decision.

The Fed begins its two-day policy meeting today and will deliver its latest policy verdict tomorrow.

"We are preparing to hear Jerome Powell ask for more patience and for more time to abate inflation. If that's the case, we could see a further meltdown in Fed rate cut expectations," Swissquote Bank said.

Stocks to Watch

BHP will likely present a new bid for Anglo American, Berenberg said. "We believe that an offer of around GBP29 per share is possible, while a higher price would likely result in BHP walking away."

Against this backdrop, there is short-term upside potential in Anglo American's shares, as such a bid would be a 5.5% premium to the diversified miner's closing price on Monday, Berenberg added.

U.S. Markets:

Stock futures crept lower as investors awaited more earnings and looked ahead to the Fed's interest rate decision.

Earnings season is picking up speed today, with results due from Amazon.com, McDonald's and Coca-Cola, among others.

Stocks to Watch

NXP Semiconductors posted first-quarter earnings that beat Wall Street estimates and said it expects second-quarter adjusted profit of $3.20 a share, higher than consensus at $3.14. Shares rose 4.8%.

Paramount Global said CEO Bob Bakish will step down and the company will create an Office of the CEO to be run by three senior company executives. Shares were down 1.1%.

Forex:

The dollar firmed across the board, while two-year Treasury yields hovered just under recent highs around 5%, supported by expectations that the Fed will keep interest rates high for longer than previously expected, Brown Brothers Harriman said.

ING said the dollar has room to appreciate on Tuesday due to prospects of U.S. employment cost index data due at 12:30 GMT--which is the Fed's preferred measure of wage inflation--showing a further increase in the first quarter.

Consensus expectations are for an acceleration from 0.9% to 1.0% in 1Q, ING said.

This could encourage bets that the Fed will temper rate-cut expectations further, boosting the dollar. Still, the U.S. currency could stall if Japan deploys more support to the yen, ING said.

TD Securities said the third quarter could open a window for recent dollar strength to ebb as U.S. growth is likely to slow just as data in the rest of the world point to a recovery.

"The growth stories continue to evolve to a point where rest-of-the-world growth is converging with U.S. growth. That remains a cross-check to an even stronger dollar rally."

This period of waning dollar strength could be short-lived, however, as political risks related to the U.S. elections, geopolitical uncertainty and fiscal risks await in the fourth quarter, TD Securities added.

Bonds:

The consensus view favors European fixed income assets, and this view has merit, Neuberger Berman said.

Neuberger Berman's view doesn't depend on a dovish turn from the European Central Bank, it said, adding that 100 basis points of ECB rate cuts this year would count as normalization after robust interest-rate hikes earlier.

"A policy rate of 3% would put us in a normal range for a backdrop of inflation at 2% and growth at 1%," it said.

However, a "normalization" outlook is still more optimistic than that of the market, and therefore it represents an opportunity.

The recent rise in Treasury yields provides an opportunity to increase duration in U.S. fixed income investments and build a curve-steepening strategy, Allianz Global Investors said.

It expects the Fed to reiterate the need for continued restrictive policies at this week's meeting, adding that slower growth and higher-than-expected inflation create a complex picture for the Fed.

AllianzGI said the market reacted too strongly to the latest inflation data. The data "merely delays the initiation of a rate cutting cycle, but does not fundamentally call it into question."

AllianzGI sees the two-year segment of the U.S. curve as attractive.

Energy:

Oil prices were broadly stable after falling more than $1 a barrel on Monday as fresh talks over a Gaza ceasefire reduce the risk premium for crude.

Still, supply risks in the region remained high and a tight oil market was limiting the price downside.

"OPEC's voluntary production cuts are in place until end of 2Q, with members who have overproduced committing to compensate in 1Q," ANZ Research said.

"This means OPEC+ output could fall further, especially when demand picks up from refiners ahead of the summer driving season."

Metals:

Base metals and gold prices fell ahead of the Fed's meeting.

Gold's slump over the week beginning April 22 reflects receding geopolitical tensions, and it remained under pressure ahead of the Fed meeting, as the market prices in just one interest-rate cut this year, Exness said.

While the Fed is expected to maintain its interest rates unchanged at this week's meeting, hawkish comments from its president could weigh on gold, it added. High interest rates negatively affect the price of non-interest bearing gold.


EMEA HEADLINES

Eurozone GDP Ticks Higher as Inflation Cools

The eurozone economy had a stronger-than-expected return to growth at the start of the year as inflation cooled, a sign that the currency area is starting to recover from the damage done by Russia's invasion of Ukraine.

The combined gross domestic product of the 20 countries that share the euro was 0.3% higher in the three months through March than in the final quarter of 2023, above the 0.1% expected by economists, the European Union's statistics agency said Tuesday.


HSBC's CEO Steps Down After More Than Four Years

HSBC Chief Executive Noel Quinn is leaving the bank after more than four years in charge.

Quinn, who spent almost his entire career at HSBC, has informed the board of his plan to retire from the bank, HSBC said Tuesday. He will remain in charge while the bank looks for his replacement.


Goldman in Talks to Unload GM Credit-Card Partnership to Barclays

Goldman Sachs is in talks to transfer its General Motors credit-card program to Barclays, in what would be a big step in the Wall Street bank's retreat from consumer lending.

Barclays is the leading candidate to take over issuance of the credit cards, which have about $2 billion of balances outstanding, and could strike a deal with GM by this summer, according to people familiar with the matter.


Glencore Backs Guidance After Declines in Copper, Coal Output

Glencore backed its full-year production guidance despite slight declines in its copper and coal output in the first quarter of the year.

The Switzerland-based commodity mining and trading company said Tuesday that its first-quarter copper output fell 2% to 239,700 metric tons compared with the same period a year prior, while production of coal-its main profit center-declined 1% to 26.6 million tons.


GLOBAL NEWS

Asia-Pacific Economies' Resilience Spurs IMF Forecast Upgrade

Asia-Pacific economies seem to be weathering the impact of high interest rates, weak global demand and other headwinds rather well, the IMF says as it upgrades its growth forecast for the region.

"With rapid disinflation and resilient growth, Asia and the Pacific is closing in on a soft landing," the International Monetary Fund said in a report.


China's Factory Activity Keeps Growing But Loses Some Steam

China's latest batch of factory activity showed that the vast manufacturing sector has continued growing, but might have lost some steam as economic headwinds persist.

The country's official manufacturing purchasing managers index expanded for a second straight month in April but at a slower pace, data from the National Bureau of Statistics showed Tuesday. The headline reading fell to 50.4 in April from 50.8 in March, but still beat the forecast of 50.2 by a Wall Street Journal poll of economists. A reading above 50 indicates an expansion in activity while a reading below indicates contraction.


Japan Govt to Respond Firmly to Excessive FX Movements, Top Currency Official Says

TOKYO-Japan's top currency official said the weak yen was hurting vulnerable people by raising the price of imported goods such as food, adding that the government would respond firmly to excessive movements in the currency market.

Masato Kanda, vice minister of finance, spoke Tuesday after the yen weakened to a multidecade low of around 160 to the dollar on Monday. Japan intervened Monday to prop up the yen, people familiar with the matter said.


China Hints at Rate Cuts, Property-Market Support as it Warns of Rising Uncertainties

SINGAPORE-China signaled a new campaign to revive its flagging economy, hinting at lowering borrowing costs and propping up the property market while announcing plans to convene a long-deferred policy meeting, whose delay had fueled unease about Beijing's economic management.

At a Tuesday meeting, the Communist Party's elite Politburo warned of "significantly rising external uncertainties," an apparent reference to global geopolitical and economic frictions. It said it would gather the party's top 370 or so officials for a plenary meeting, or plenum, in July to discuss economic development and reforms.


NATO Prepares to Face Russia-and Problems of Its Own

ADAZI MILITARY BASE, Latvia-NATO troops from 14 nations amassed last month in a wooded area here to take part in the alliance's biggest military exercise since the Cold War. Once again, the focus was Russia.

The drill began in the early morning darkness with a warning: Enemy forces had crossed Latvia's border with Russia and were closing on the capital. Communicating in various languages over different kinds of radios, the troops raced to push the mock invaders toward wetlands that would bog down their tanks.


Israel Prepares to Send Delegation to Cairo for Last-Chance Gaza Cease-Fire Talks

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04-30-24 0549ET