MARKET WRAPS
Watch For:
Flash PMI data for eurozone, Germany, France, UK; trading updates from SAP, BMW, Holcim, Sasol
Opening Call:
European shares could struggle for momentum at Friday's open as sentiment weakens. Asian stock benchmarks tracked Wall Street indexes lower; the dollar fell slightly; Treasury yields steadied; while oil and gold futures fell.
Equities:
Stocks may struggle at the European open on Friday as recession fears build.
Weak corporate earnings reports have deepened concerns that the Federal Reserve's effort to fight inflation by raising interest rates is pushing the U.S. economy toward a recession.
"The tone of earnings reports has been pretty downbeat," said Edward Park, chief investment officer at London-based Brooks Macdonald. "It's not really pushing back against the recession narrative, and equally it's not endorsing it."
"The last few days household-name companies have disappointed, be it Tesla, Netflix and Goldman Sachs," said Art Hogan, chief market strategist at B. Riley Wealth.
Turmoil in the banking sector last month broadly lowered traders' projections for how high the Fed will raise interest rates. Many are wagering another quarter-percentage-point rate increase in May will be the central bank's last rate increase for now, according to CME Group's futures-market tracker.
Yet investors who are hoping that the Fed will cut rates quickly later this year-a potential boon for the stock market-may be out of luck, said Amanda Agati, chief investment officer at PNC Asset Management. Inflation remains a pressing concern and it is too soon for the Fed to relax its stance, she said.
"We've been saying for a while now that the market is like a kid in a candy store, craving a sugar high from more policy accommodation," Agati said.
Forex:
The dollar fell slightly in Asia as the yen strengthened against other G-10 and Asian currencies amid risk-off sentiment driven by Wall Street losses overnight, which supports the safe-haven allure of the Japanese currency.
U.S. equities dropped across the board Thursday, weighed down by weak corporate earnings and soft economic data, Commerzbank said. That has made risk aversion the main theme of the session so far.
Bonds:
Treasury yields wavered, as investors weighed the prospects of an economic slowdown and Federal Reserve rate hikes through June. Treasurys rallied overnight, sending yields down by the most since early April.
Investors heard from a number of Fed speakers on Thursday. Cleveland Fed President Loretta Mester said policy makers still have more interest-rate increases ahead, while Fed Gov. Christopher Waller said the central bank needs faster processing on emergency loans.
Treasurys "outperformed on Thursday in a move that was reinforced by several second-tier data releases, but was ultimately more technical than fundamental in nature," said BMO Capital Markets.
Read: 'Getting on an elevator with no buttons': How the 2-year Treasury became the financial instrument to watch in March and a Wall Street obsession
Energy:
Oil futures fell early Friday amid worries about the impact of monetary tightening by the Fed and other central banks and the prospect of a global economic downturn.
Sentiment is also weighed by softer-than-expected U.S. labor data, with recurring unemployment benefit claims jumping more than expected, ANZ said.
ANZ thinks the market has shrugged off comments from officials saying that the U.S. would consider buying crude to refill its strategic reserve in 3Q. "The recent selloff has wiped out the gains that followed the surprise OPEC production cut."
Metals:
Gold prices fell slightly in Asia, after settling higher overnight on a tight trading range above the key $2,000-an-ounce threshold.
Focus is again on the Fed's rate path. "The increased likelihood of a recession, which tends to be deflationary, is likely to lead the Fed to wrap up its tightening campaign sooner rather than later to prevent economic scarring," DailyFX contributing strategist Diego Colman said.
"Once the FOMC hits the stop button, rates usually start to retreat quickly, as traders attempt to front-run the subsequent easing cycle," he said, adding that this scenario should be bullish for precious metals like gold.
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Copper edged lower amid signs of sluggish demand from China. An uneven economic recovery in China is weighing on sentiment in the copper market, ANZ said.
This is reflected in the Yangshan copper premium--an indicator of demand for copper imports into China--which has fallen 45% during the past five weeks to $27.50 a ton, ANZ said.
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Chinese iron-ore futures declined, extending a run of losses amid concerns about another regulatory crackdown in the market.
China's state planning body said earlier this week that it will tighten supervision of trading in the steelmaking material, including "strictly cracking down" on price speculation.
Worries about softening demand are also weighing on the market, with analysts from China Futures saying that iron-ore stock replenishment activity remains low, indicating weak demand.
TODAY'S TOP HEADLINES
Banks take out more loans from Fed in sign of lingering stress on financial system
The numbers: Cash-hungry banks slightly increased borrowing from the Federal Reserve for the first time in five weeks, to $143.9 billion, in a sign of lingering stress on the U.S. financial system.
A bevy of mostly mid- to small-sized banks have borrowed heavily from the Fed through an emergency program set up after the failure of Silicon Valley Bank in March. The Fed set up the program to prevent further bank runs and stabilize the U.S. financial system.
Loretta Mester Says Fed Must Do More to Tackle Stubborn Inflation
Federal Reserve Bank of Cleveland President Loretta Mester said the U.S. central bank is much closer to the end of monetary policy tightening than the beginning, but it must still do more to lower inflation.
Despite progress in lowering inflation from last year's highs, it remains too high and is proving to be stubborn, Ms. Mester said Thursday during a speech in Akron, Ohio.
Janet Yellen Says Security Comes Before Economy in U.S.-China Relationship
WASHINGTON-Treasury Secretary Janet Yellen said protecting national security would be the U.S. priority in its relationship with China even if it slows economic growth, taking a hawkish stance as she pushed for more collaboration with Beijing.
In a speech Thursday, Ms. Yellen laid out the Biden administration's vision for its economic relationship with China. The U.S. will remain the world's dominant economic power, Ms. Yellen said, curbing its ties with China in certain areas. But she said the U.S. isn't trying to prevent China's economic advancement, adding that many trading and scientific links should remain.
UK Consumer Confidence Rose Again in April Despite High Inflation
Confidence among U.K. consumers rose for third consecutive month in April to its highest level in more than a year, indicating that momentum toward an economic recovery could be building, despite cost-of-living pressures from sky-high inflation.
Research firm GfK said its consumer-confidence barometer stood at minus 30 in April compared with minus 36 a month earlier, an improvement on the minus 34 expected by economists polled by The Wall Street Journal.
Barclays Names HSBC Executive as Compliance Chief
Barclays PLC has hired a new chief compliance officer from rival HSBC Holdings PLC, as the bank navigates a deal-making downturn and continuing regulatory investigations into former Chief Executive Jes Staley's ties with convicted sex offender Jeffrey Epstein.
London-based Barclays said Thursday that it has named Kirsty Everett as its new compliance chief, ending a few months of search. Ms. Everett is joining from HSBC, where she was group head of compliance after previously holding other senior compliance roles. She will start July 1, subject to regulatory approval, Barclays said.
Europe's Air-Traffic Agency Under Attack From Pro-Russian Hackers
Europe's air-traffic control agency said Thursday that it was under attack from pro-Russian hackers amid fears that Moscow could interfere with the region's critical infrastructure as its confrontation with the West escalates.
The cyberattack on the agency's website started on April 19, a spokeswoman for the European Organisation for the Safety of Air Navigation, also known as Eurocontrol, said, adding that it wasn't affecting the agency's air-traffic control activities.
BHP Downgrades Escondida, Nickel Production Guidance
BHP Group Ltd. said it would produce less copper than expected at the Escondida mine in northern Chile this fiscal year, but stuck with its annual group copper-production estimate, citing the strong performance of other operations in Chile and Australia.
The world's largest miner by market value cut its annual estimate for nickel production, in part due to heavy rainfall.
Mark Zuckerberg Says Meta Will Slow Hiring, Won't Rule Out Future Layoffs
Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg told employees that he won't rule out future layoffs and said he doesn't expect the social-media company to hire as quickly as it did before the layoffs that began late last year.
Mr. Zuckerberg addressed employees in a virtual Q&A session Thursday, a day after the company completed its latest round of layoffs. Mr. Zuckerberg told employees that about 4,000 employees, primarily in the company's tech divisions, were affected by the latest cuts, according to a recording of the employee town hall. Since November, Facebook's parent company has said it would lay off 21,000 employees, or nearly a quarter of its workforce.
Google Looks to Turbocharge AI Efforts With Combined Brain, DeepMind Unit
Alphabet Inc.'s Google merged its two main artificial-intelligence research units, a major reshuffling as tech companies jockey for leadership in an area quickly reshaping business.
(MORE TO FOLLOW) Dow Jones Newswires
04-21-23 0016ET
