MARKET WRAPS
Stocks:
European stocks traded lower on Friday, tracking declines in Asia and the U.S., as stocks reversed the rally that followed this week's U.S. inflation data.
"A sea of red at the market close left U.S. markets below where they started and that negativity set the tone for European markets on Friday, " AJ Bell said.
SEB said market sentiment turned after a repricing of the Federal Reserve's future rate cuts in the swap market.
"Swap traders had raised expectations from one cut in 2024 to two after Wednesday's inflation release, but on Thursday, those bets pulled back, leaving only one cut fully priced in this year."
Comments from Fed members Thomas Barkin and John Williams suggested they are in no hurry to cut rates, while the ECB's Isabel Schnabel said a rate cut in July doesn't seem justified .
Stocks to Watch
H&M could drive outperformance through several sources of upside, RBC Capital Markets said, upgrading H & M to outperform from sector perform and raising its price target to SEK200 from SEK190.
Maersk is benefiting from the continuing disruption in the Red Sea that is limiting oversupply in the market, but this is leading to higher operating costs for carriers and excess capacity remains a threat when the situation returns to normal, AlphaValue said.
It downgraded its rating on Maersk stock to add from buy and lowers its target price to DKK13,020 from DKK15,352.
U.S. Markets:
Stock futures edged lower, but the three main indexes are all up more than 5% so far in May.
Stocks to Watch
Reddit struck a licensing deal with OpenAI that will give ChatGPT access to its content. Reddit shares climbed more than 10% in premarket trading.
Take-Two Interactive Software said its next Grand Theft Auto game won't launch until fall 2025, and cut its annual outlook. Shares fell more than 2%.
Forex:
A stabilization in EUR/USD around 1.08/1.09 or some modest downside pressure is ING's expectation for the near term.
"Our view for the near term remains that we could see a further stabilization in USD crosses as markets await the next key data input: April core PCE on 31 May," ING said.
EUR/USD may be lacking enough support to break decisively above 1.0900 before the weekend, even though that doesn't look like a very strong technical resistance, it added.
The dollar should weaken further over the medium term, UBS said.
"While the dollar may be supported in the near term as the ECB and the Bank of England are likely to start lowering rates ahead of the Fed, we expect modest USD depreciation as growth outside the U.S. improves."
Sterling was relatively unchanged in the absence of major market-moving data releases.
U.K. inflation data is due on Wednesday and a softer-than-expected reading is likely to see the pound edge lower while a stronger reading is likely to support the pound, Monex Europe said.
Bonds:
If the ECB avoids boosting expectations of an interest-rate cut at its July meeting, U.S. data and market expectations for Fed rates will remain an important driver of eurozone bonds through the summer, SEB Research said.
In line with the majority of the market, SEB Research expects a first ECB rate cut in June, coupled with a cautious message regarding the prospect of further cuts.
Societe Generale Research said the net supply of eurozone government bonds will likely be positive in June but investors' risk sentiment is likely to be the main driver of spreads.
Net supply is likely to be positive especially in France, Spain and Italy, in line with seasonal patterns, it added.
"While important for EGB [eurozone government bond] spreads, investor risk sentiment will, in our view, be the main driver in the coming months."
Barring a significant weakening of demand, the strategists don't expect supply to have a significant impact on country spreads, SocGen said.
SocGen also said German Bunds look to offer more value versus Treasurys during the countdown to ECB interest-rate cuts, but major rallies in Bunds are unlikely.
The 10-year Treasury yield is likely to edge lower, based on the daily chart, UOB said.
Earlier this week, the yield dropped to clearly break below support on its ascending trend line and its 55-day exponential moving average, it noted. Downward momentum has increased with breach of these two support levels, though it's not sufficient to suggest the beginning of a sustained fall in the yield.
However, there seems potential for the yield to inch lower in the coming month, with initial support at the daily Ichimoku cloud's bottom, UOB said.
Energy:
Oil prices rose, as positive sentiment was being supported by the second consecutive weekly fall in U.S. crude oil stockpiles, while signs of slowing inflation added to the bullish mood, ANZ Research said.
The market is awaiting OPEC's next move, with three possible scenarios for the June 1 meeting--extend, unwind or completely remove the voluntary cuts of 2.2 million barrels a day, ANZ said.
An extension is the most likely outcome--ANZ models removing the cuts could lead prices to fall as low as $75 a barrel, while an extension could produce deficits and push prices as high as $100 a barrel.
Metals:
Gold edged higher, holding ground after U.S. data releases lowered Treasury yields and the dollar, and increased expectations for earlier Fed rate cuts, Commonwealth Bank of Australia said.
EMEA HEADLINES
Tencent's Top Shareholder Taps New Chief in AI Ramp-Up
Tencent Holdings top shareholder Prosus and its parent company Naspers named Fabricio Bloisi as their new chief executive as the tech investors seek to chart a new course for the age of artificial intelligence.
Naspers made a $34 million bet on Chinese tech giant Tencent more than twenty years ago that turned into a multibillion-dollar investment and made it the WeChat maker's biggest shareholder. However, it has grappled for years with a discount between its own market value and that of its stake in Tencent.
Richemont Appoints Nicolas Bos as New CEO
Cartier owner Richemont said Nicolas Bos, currently chief of its French jewelry brand Van Cleef & Arpels, will replace Jerome Lambert as its chief executive officer.
Bos-who joined Richemont in 1992-will take the CEO position at the Swiss luxury group and join its senior executive committee on June 1, the company said Friday.
Engie Backs Outlook Despite Dip in Earnings
Engie backed its guidance after its renewables and flexible generation segments helped buoy first-quarter earnings.
The French multinational power utility on Friday posted earnings before interest, taxes, depreciation and amortization of 5.4 billion euro ($5.87 billion) in the first three months of the year, 0.7% lower on an organic basis than in the same period last year.
Netanyahu Pacifies Israel's Far Right and Alienates Everyone Else to Survive
TEL AVIV-Israeli Prime Minister Benjamin Netanyahu's approach to the Gaza war is frustrating almost everyone with a stake in the fight, including his allies.
The U.S. wants at least a temporary cease-fire. Israeli security officials, including the defense minister, want a plan for who will rule postwar Gaza. And hostage families want their loved ones home.
GLOBAL NEWS
Trump vs. Biden: How the Dow's Performance Compares
The Dow Jones Industrial Average's first foray above 40000, though brief, is the latest sign the economy has shrugged off the threat of recession in the midst of retreating inflation and hopes for lower interest rates. It is one bit of welcome news for President Biden, whose approval-and re-election prospects-are being held down by public dissatisfaction with the economy.
On X, Biden called the milestone "great news for Americans' retirement accounts and another sign of confidence in America's economy."
The stock market isn't the economy, but it is the most prominent, and most frequently updated, benchmark of financial and economic performance. How strong a case, then, does it make for Biden? Superficially, pretty strong. As of Thursday's close, the Dow is up 28% since he was inaugurated in January 2021-a respectable run. It is also slightly more than where the Dow was at the same point of Donald Trump's presidency.
China Is Finally Getting Serious About a Housing Rescue
China rolled out its boldest steps yet to fix its broken housing market, as Beijing sought to finally bring to an end a drawn-out real-estate crunch that has hobbled its economy for years.
The centerpiece of measures outlined Friday is Beijing's embrace of a policy already being tested in some cities in China-getting city and local authorities to buy up unsold or unfinished homes and convert them into affordable housing for low- and middle-income families.
China Consumption and Investment Slow Unexpectedly
China's consumption and investment slowed unexpectedly in April, while industrial output beat expectations as Beijing doubled down on its manufacturing drive to spur growth amid a prolonged property slump and growing trade tensions with the West.
Retail sales, a major gauge of consumption, increased 2.3% in April from a year earlier, down from the 3.1% growth recorded in March and the 4.0% rise expected by economists surveyed by The Wall Street Journal.
Biden's Urgent Push to Win Black Voters Starts Now
ATLANTA-President Biden is courting Black voters this weekend in a flurry of high-profile events, in a bid to reclaim support among a once-reliable voting bloc now showing a lack of enthusiasm.
The marquee event is delivering the commencement address at Morehouse College, the prestigious, all-male historically Black college and the alma mater of Dr. Martin Luther King Jr. on Sunday. After his speech at Morehouse, the president is flying to Detroit to speak at a large NAACP chapter dinner there.
Trump Allies Draw Up Plans for Unprecedented Immigration Crackdown
(MORE TO FOLLOW) Dow Jones Newswires
05-17-24 0554ET
