MARKET WRAPS
Stocks:
Shares were little changed on Wednesday in subdued trading, with most European markets closed, and as investors remained cautious ahead of the Federal Reserve's latest interest rate decision.
In his press conference, Jerome Powell is expected to signal the central bank is ready to keep rates higher for longer, in the face of sticky inflation.
Swissquote Bank said the Fed must respond to three months of jumps in inflation and might dial back plans to ease.
"There is even a risk that the Fed drops the expectation of a rate cut in 2024; that's the most dovish statement that could reasonably be expected from the Fed at this point, and in the light of the latest economic data," it added.
U.S. Markets:
Stock futures edged lower, while the 10-year Treasury yield edged higher, after settling at 4.683% on Tuesday.
As well as the Federal Reserve and Jerome Powell, Amazon.com will be in focus after the company reported record first-quarter sales late Tuesday.
Also on Wednesday's slate are earnings from ADP, CVS Health, Mastercard, Pfizer and Qualcomm. Economic updates include the ADP employment report and the ISM manufacturing index.
Forex:
Equity markets falling while the Federal Reserve pushes back on interest-rate cut prospects due to persistently high inflation during Wednesday's announcement, could be a boon for the dollar, ING said.
In recent months, the safe-haven dollar's gains have been limited because equities have rallied, despite investors substantially scaling back rate-cut expectations, ING said.
"Rising equity markets have prevented the dollar from rallying as much as yield differentials would suggest."
Bonds:
Gilt yields climbed ahead of the Federal Reserve decision.
"The main focus is on Jerome Powell's press conference and what signals he gives about future interest rate policy," IG said.
Powell is expected to signal a cautious approach to interest-rate cuts given recent stronger-than-expected inflation data, IG added.
Energy:
Oil futures were down more than 1% after the latest U.S. economic data further dented hopes the Federal Reserve could start cutting interest rates anytime soon.
Meanwhile, according to reports citing figures from the American Petroleum Institute, U.S. crude inventories unexpectedly grew last week-a typically bearish sign for the market that implies weaker demand.
Metals:
Metal prices traded lower, with gold falling back below $2,300, as traders further temper expectations on the timing of U.S. interest-rate cuts this year.
"Swap traders are now pricing in two rate cuts by year end, the fewest number of expected reductions since November 2023," ANZ Research said, adding that a stronger dollar was also weighing on demand.
China
China's latest PMI surveys suggest the economy continues to grow at a faster clip than a few months ago, supporting commodity demand, Capital Economics said.
The new export orders component hit a 14-month high in April, and as export goods are typically commodity-intensive, that could be fueling part of the recent rally in industrial metals, CE said.
The construction sector's rise suggests fiscal stimulus is propping up the ailing property sector. That has seemingly helped put a floor under steel prices, though not for copper, it added.
The data, plus the Politburo's promises of continued policy support, back CE's view that China's metals demand will grow this year, though more slowly than in the past.
EMEA HEADLINES
European Oil Companies Weigh U.S. Listings to Boost Their Stock Prices
European oil-and-gas companies have rarely beaten their American counterparts in stock performance over the past few years. Now, the thinking goes, it may be time to join them-at least in terms of the location of their stock listings.
TotalEnergies CEO Patrick Pouyanné told analysts on the company's earnings call on Friday that it is considering moving its primary stock listing from Paris to New York. TotalEnergies' board asked Pouyanné to look into it, he said, and the company plans to make a decision by September.
GSK Lifts Guidance After Turnover Beats Expectations
GSK lifted its full-year guidance after first-quarter turnover rose and beat expectations, helped by higher sales in its vaccines and specialty medicines segment.
The British pharmaceutical giant said Wednesday that it now expects turnover growth this year toward the higher end of its previously guided 5% to 7% range. It now expects core operating profit growth of 9% to 11% compared with previous expectations of 7% to 10%, and anticipates core earnings per share growth of 8% to 10% compared with the previously guided 6%-9%.
Haleon Pretax Profit Rises Despite Revenue Drop
Haleon reported a higher pretax profit for the first quarter despite lower revenue against tough comparatives in the prior year particularly in Respiratory Health and Pain Relief, but backed its full-year guidance.
The consumer-healthcare business-which was spun out of GSK and is partly owned by Pfizer- said Wednesday that for the three months ended March 31 pretax profit was 590 million pounds ($737 million) compared with GBP542 million for the same period a year earlier.
ProSiebenSat.1 Media Shareholders Reject MFE-MediaForEurope's Split Plan
ProSiebenSat.1 Media shareholders rejected a proposal by top investor MFE-MediaForEurope to begin preparations for splitting the German company into two businesses as it didn't get the required majority.
Nearly 71% of the votes cast at ProSiebenSat.1's annual general meeting on Tuesday were in favor of the proposal, falling short of the 75% required for the resolution to be approved, while around 29% were against it, according to voting results published by the company.
Next PLC Backs Guidance Despite Full-Price Sales Rise Beat
Next PLC has backed its full-year guidance as it reported a rise in full-price sales for the first quarter, above its expectations.
The fashion retailer-which is seen as a bellwether for the sector in the U.K.-said Wednesday that full-price sales rose 5.7% compared with expectations for a 5% increase as guided in March, reflecting bad weather for the comparable period a year earlier, which led to a 0.7% fall in sales.
Aston Martin Loss Widens on Revenue Drop, But Expects Boost From New Models
Aston Martin Lagonda Global Holdings reported a widened loss for the first quarter on lower revenue, but said it expects the launch of four new models this year will drive growth in the second half.
The British maker of luxury sports cars on Wednesday joined European peers in reporting weaker sales and earnings for the first three months of the year compared with a year ago, but stuck to its 2024 outlook. This echoed trends shown in first-quarter updates from carmakers Volkswagen, Stellantis and Mercedes-Benz Group on Tuesday.
GLOBAL NEWS
Beijing Braces for a Rematch of Trump vs. China
Last year, as Mike Pompeo's memoir, "Never Give an Inch," made the rounds among China's leaders, one passage in particular enraged Xi Jinping. The secretary of state under former President Donald Trump wrote that the U.S. should "grant full diplomatic recognition" to Taiwan.
Xi's anger at the remark foreshadowed a broader worry coursing through Beijing: What awaits China should Trump and his inner circle regain power?
Fed to Signal It Has Stomach to Keep Rates High for Longer
An ancient Chinese proverb that counsels "do nothing, and everything will be done" could sum up the Federal Reserve's latest approach to interest-rate policy.
Fed officials will hold their benchmark federal-funds rate steady at its highest level in more than two decades, around 5.3%, at their two-day policy meeting that begins Tuesday.
Israel Prepares to Send Delegation to Cairo for Last-Chance Gaza Cease-Fire Talks
Israel is ready to send a delegation to Cairo in the coming days to discuss a halt in fighting in the Gaza Strip, Israeli and Egyptian officials said Tuesday, as Arab mediators push militant group Hamas to accept cease-fire terms before an impending military operation in Rafah.
David Barnea, the head of the Mossad intelligence agency, is considering a trip to the Egyptian capital this week after Arab mediators presented to Hamas over the weekend a deal to free hostages held by the group in return for a fighting pause, Egyptian officials said. An Israeli official said Tuesday that Israel could send a delegation depending on developments in the negotiations.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
05-01-24 0513ET
