MARKET WRAPS
Watch For:
U.S. Producer Price Index for March; Bank of Canada Rate Decision; U.S. EIA Weekly Petroleum Status Report; JPMorgan Chase & Co. 1Q results; BlackRock Inc. 1Q results.
Opening Call:
Stock futures rose ahead of earnings reports from major companies and as investors considered the highest inflation in four decades.
Stocks have come under pressure in recent days as concerns about inflation drove uncertainty about how aggressively the Federal Reserve could act to temper it. A data release on Tuesday showed that consumer prices accelerated further in March, rising 8.5% from a year earlier. The monthly increase was in line with economists' expectations and core inflation which excludes food and energy was slightly lower than predicted, according to Deutsche Bank.
"The inflation data was obviously not great, but maybe we're around the peak and we'll start to see something of a disinflationary trend over the coming months," said Esty Dwek, chief investment officer at FlowBank. "With bank earnings kicking off, we can get some direction. It's really going to be about the guidance that we get for the rest of the year."
JPMorgan, BlackRock, Delta Air Lines and Bed Bath & Beyond are slated to report Wednesday ahead of the opening bell. Goldman Sachs, Citigroup, Morgan Stanley and Wells Fargo are set to follow on Thursday.
The U.S. producer-price index for March, another gauge of inflation, is set to be released at 8:30 a.m. ET.
In Europe, Russian President Vladimir Putin said Tuesday that peace talks had reached a dead end and that his forces would continue their offensive in Ukraine.
Market Insight:
UniCredit's global leading indicator declined in March to levels consistent with global trade almost stagnating in 2Q. It was the first decrease after four monthly rises in a row, leaving the indicator at its lowest level since October.
This drop reflects the negative impact from the Russia-Ukraine crisis, according to UniCredit. A further deterioration is likely, the Italian bank said.
"Furthermore, given the rather lackluster development in the last few months, global trade might already come in stagnation territory in 2Q," UniCredit said.
The March reading is consistent with global trade rising a mediocre 0.7% on an annualized 3-months-on-3-months basis compared to its long-term average growth of between 4% and 5%, the bank said.
Stocks to Watch:
GlaxoSmithKline has agreed to buy U.S. rare cancer therapy company Sierra Oncology for $1.9 billion in cash, as it looks to boost its portfolio of new specialty medicines.
The U.K. drugmaker will pay $55 a share to buy San Mateo, California-based Sierra Oncology, Glaxo said in a statement on Wednesday, representing a 39% premium to Sierra's closing price of $39.52 on Tuesday. Sierra Oncology shares were soaring 37.9% to $54.50 in premarket trading Wednesday. American depositary receipts of Glaxo were up 0.3%.
Investors holding about 28% of Sierra's stock have agreed to vote in favor of the deal, GlaxoSmithKline said.
Forex:
The dollar rose as traders continue to bet on the Fed raising interest rates more aggressively even after data on Tuesday showed underlying inflation eased slightly in March.
The dollar briefly fell after the U.S. Labor Department said core consumer prices, which exclude volatile food and energy prices, rose 0.3% month-on-month in March after a 0.5% rise in February.
"We do not expect the March CPI on its own to alter the Fed's current plans for faster policy tightening in the near-term," MUFG Bank currency analyst Lee Hardman said in a note.
The dollar's decline on Tuesday was a correction rather than trend reversal, he said.
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The euro could rise considerably if ECB President Christine Lagarde's remarks at Thursday's meeting prompt the market to bet on an interest-rate rise as early as June, Ebury said.
Lagarde is likely to reiterate that the ECB will raise rates "some time" after asset purchases end but she could flag increased concerns over the persistence of high inflation, Ebury analysts said.
"Should the market perceive Lagarde's comments as leaving the door open to a hike at either of the June or July meetings, then the euro would likely rally rather sharply, particularly given the current suppressed value of the euro."
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Sterling fell against the dollar after data showed U.K. inflation accelerated in March, adding pressure on already squeezed household incomes. U.K. inflation rose to an annual rate of 7.0% in March from 6.2% in February, above the 6.7% expected by economists in a WSJ survey.
"The figures will add further pressure to the Bank of England to accelerate the pace of interest rate increases, even though the growth outlook has deteriorated," BRI Wealth Management's Dan Boardman-Weston said in a note.
The sharp rise in the cost of living, higher taxes and rate increases are hitting consumer demand, he said.
Bonds:
The yield on the benchmark 10-year Treasury note edged up to 2.784% from 2.724% on Tuesday, resuming its march upward after declining the day before.
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European government bonds sold off with the benchmark German 10-year bond yield rising to 0.857%. The European Central Bank is meeting on Thursday and investors are awaiting more clarity on plans to curb stimulus measures.
"ECB speakers have turned a little bit more hawkish lately," said Jeremy Gatto, a multiasset investment manager at Unigestion. "They seem now to be agreeing that inflation might be a concern. It's difficult to get excited about Europe."
Commodities:
Oil edged higher after Russia casts doubt on the success of Ukraine peace negotiations, while weak data from China capped gains. Vladimir Putin said peace talks were at a "dead end," dashing hopes that a diplomatic solution could end the conflict and ease the oil market's supply crunch.
Data showed China's imports fell by 0.1% on year in March, sharply missing expectations for an 8% rise, as a lockdown in Shanghai took a toll on the nation's economy.
The IEA said Wednesday the lockdown would weigh on demand for crude. It cut its forecast for demand this year by 260,000 barrels a day to 99.4 million barrels a day.
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While restrictions against Russian gas remain unlikely in the short term, fast-developing events have brought Europe closer to an oil embargo, Eurasia Group said.
"Political momentum is building across the EU to ban imports of Russian crude and petroleum products as Moscow shows no signs of de-escalation and Ukraine uncovers more alleged war crimes," Eurasia Group said.
Therefore the political risk consulting firm has raised the aggregate odds of an agreement on comprehensive EU oil sanctions, with a phased approach, to 60% from 45% by July 1. The package, which will likely be agreed in late May or June, would deliver a comprehensive phasing out of most crude imports from Russia by the end of 2022, according to Eurasia Group.
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Gold prices were steadying, after prices spiked in late trading on Tuesday, with rising rates of inflation in the U.S. pushing investors into safe-haven assets like gold.
Data on Tuesday showed United States' inflation soared to 8.5% in March--a four-decade high--and figures from the United Kingdom released today show similar trends, with March's inflation rate hitting 7%, the highest level in thirty years.
Rising fuel and food prices continue to add to headaches for policy makers, making assets like gold an attractive investment amid the economic turmoil.
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Zinc prices were continuing to climb, rising on low inventory stock levels both in Europe and China. Three-month futures in London were 1.9% higher at $4,482 a metric ton, up from $3,576 a ton on Jan. 4, a 20% hike year-to-date.
Analysts are expecting this rise to continue, with stock inventories in London low, and demand in China still increasing. "We now hear additional reports than there is a somewhat lack of zinc concentrates which is affecting onshore smelter operating rates, coupled with the ongoing story that traders are continuing to draw on domestic inventories to make-up for lost overseas production," analysts at Marex said in a note referring to Chinese demand.
TODAY'S TOP HEADLINES
Halozyme Therapeutics Nears Deal to Buy Antares Pharma
Halozyme Therapeutics Inc. is close to a nearly $1 billion deal to buy specialty pharmaceutical company Antares Pharma Inc., according to people familiar with the matter, in a move that would deepen its focus on drug delivery.
Halozyme would pay $5.60 a share in cash in a deal that could be announced Wednesday and value Antares at roughly $960 million, the people said.
Hyundai to Start EV Production in U.S.
Hyundai Motor Co. will start making electric vehicles in the U.S., with Hyundai Motor Manufacturing Alabama to produce such new-energy vehicles on its Montgomery assembly line.
Hyundai will build the Electrified Genesis GV70 and a hybrid version of the Santa Fe model. The Santa Fe hybrid will begin U.S. production in October and the Electrified GV70 in December.
PayPal CFO John Rainey Leaving to Join Walmart as CFO
Walmart Inc. on Tuesday said it poached PayPal Holdings Inc.'s John Rainey to become its next chief financial officer.
The Bentonville, Ark.-based retail giant on Tuesday said it named Mr. Rainey chief financial officer, effective June 6. Mr. Rainey has served as CFO of PayPal for nearly seven years. Walmart previously announced that its current CFO Brett Biggs would leave by early next year, overseeing the transition.
Renault Eyes Electric Spinoff, Listing
Renault SA is looking at spinning off and separately listing its electric-vehicle business, the French auto maker said Wednesday.
Confirming comments made the previous day by Chief Executive Luca de Meo, a spokesperson for Renault told Agefi-Dow Jones that the company was considering listing its electric activities separately.
GlaxoSmithKline to Acquire Sierra Oncology for $1.9 Bln
(MORE TO FOLLOW) Dow Jones Newswires
04-13-22 0611ET
