MARKET WRAPS
Stocks:
European shares rose on Friday, with the tech sector helped by Apple's above-forecast earnings. However gains were capped as investors cautiously awaited the U.S. jobs report.
"Post-FOMC, the significance of U.S. payroll data has taken on a monumentally heightened significance. And it's a report that consistently has the potential to induce market volatility," SPI Asset Management said.
Shares of Anglo American rose on after a report that Glencore was considering making a rival offer for the mining company.
Reuters reported, citing two unnamed sources, that Glencore has been having internal discussions about making such a bid, after BHP's $39 billion proposal was rejected.
U.S. Markets:
Stock futures traded higher with April's monthly jobs report taking center stage. Here's what to know:
Economists expect the U.S. added 240,000 jobs in April, down from 303,000 in March.
The unemployment rate is seen steady at 3.8%.
Average hourly earnings are forecast to have climbed 0.3% from the previous month and 4% from a year ago.
Forex:
ING said weaker jobs data could cause the dollar to extend falls, after it hit a three-week low against a basket of currencies.
"We do not expect today's data to dent the bearish dollar momentum as markets may fully price in a cut in September and keep short-term dollar rates capped," ING said.
It noted that despite recent strong payrolls data, U.S. business surveys suggest "substantial slowing" in employment.
Norges Bank has clearly hinted that the key rate will stay high for longer than it signaled in March, Nordea said.
The central bank said that data so far could suggest that a tight monetary policy stance may be needed for somewhat longer than previously envisaged and additionally cited a weak krone and higher rates abroad.
Bonds:
The Bund yield is expected to remain largely in line with its current level, trading around 2.5% in the autumn, SEB Research said.
The continued reduction of securities holdings by the European Central Bank will add some underlying upside pressure to long yields, but policy rate expectations will nevertheless remain the main driver, SEB said.
Markets currently price in three rate cuts by the ECB this year, but further reductions in rate cut expectations are an upside risk to SEB's Bund yield forecast.
Commerzbank Research said Bunds seem to be establishing a new range above the 2.5% yield level in the 10-year maturity, with moves higher offering entry opportunities to investors.
"We suggest scaling into tactical longs with yields closer to 2.6%."
The recovery in Bunds will be put to the test "as the market needs to brace itself for another solid U.S. payrolls report," Commerzbank said.
SEB Research said Treasury yields are expected to be driven primarily by market expectations of Federal Reserve interest rates on the back of upcoming data and Fed policymakers' comments in the coming months, with no surprise in the Treasury's quarterly refunding plan.
The Treasury left the issuance of longer-term debt unchanged for May-July, and also said it doesn't anticipate an increase to the nominal coupon auction-a reference to note and bond issuance-or floating rate auction sizes for at least several quarters.
Saxo said the two-year Treasury yield is expected to fluctuate between 4.75% and 5% until clarity emerges regarding potential interest-rate cuts by the Federal Reserve, while long-term yields may continue to climb.
Drivers behind higher long-term yields are increased term premium and elevated coupon [note and bond] issuance, Saxo said.
"With rising inflation risks and market uncertainty, investors are likely to demand higher premiums to hold U.S. Treasuries, exerting upward pressure on the long end of the yield curve."
Saxo said the long end of the yield curve remains susceptible to higher yields, adding that the 10-year yield reaching 5% before quarter-end cannot be ruled out.
Russell Investments said investors may wish to consider lengthening out the duration of their bond portfolios as the recession risks haven't fully gone in the U.S..
"While the word 'recession' may have slipped from the market's vocabulary, we don't think recession risks have fully abated," Russell Investments said, still seeing a 35% probability of a recession in the U.S. over the next 12 months.
"If the U.S. economy tips into a recession, the Fed would need to respond by aggressively cutting interest rates, which would benefit bondholders."
TwentyFour Asset Management said volatility in bond markets might decline in the coming weeks as the Federal Reserve's meeting and the Treasury's quarterly refunding announcements are now out of the way.
Lower volatility could allow Treasurys, Bunds, Gilts and other G-7 government bonds to trade sideways until a new catalyst emerges.
"After an 80 basis points selloff in 10-year Treasuries, further outsized moves require a continuous dose of increasingly bad news."
Energy:
Oil inched higher as traders assess the geopolitical and macroeconomic backdrop after a bearish week for the commodity.
Still, the benchmarks are on course for another weekly loss as renewed hopes for a deal between Israel and Hamas, a weekly build in U.S. crude inventories and the prospect of higher-for-longer interest rates weigh on sentiment.
OPEC+
OPEC and its allies are likely to extend their voluntary production cuts beyond the second quarter at their upcoming meeting in June, according to JPMorgan.
"While several key indicators tracked by OPEC suggest relatively strong fundamentals, a large counter-seasonal build in visible oil inventories in April is a concern and at odds with our forecast of only 0.1 million barrels a day surplus."
JPM keeps its oil price forecast unchanged, with Brent crude at an average of $88 a barrel from May to September.
Metals:
Gold was flat and may have retreated somewhat from its April record highs, but it should still appreciate to around $2,700 an ounce by the end of the year in a base case scenario, Goldman Sachs said.
Central banks and Asian household spending continue to drive demand, and interest rates--which negatively affect sentiment toward non-interest bearing bullion--should lower over the year, Goldman Sachs said.
Central banks have stocked up since mid-2022, with global gold purchases tripling since Russia's invasion of Ukraine, and new geopolitical or financial shocks may push prices higher, Goldman Sachs said.
EMEA HEADLINES
Societe Generale Backs Guidance After Lower Net Profit
Societe Generale reported lower net profit for the first quarter on slightly weaker revenue but reiterated its 2024 guidance and signaled an improvement in its French retail-banking arm.
The French lender said Friday that its net profit was 680 million euros ($729.4 million), compared with EUR868 million in the same period a year earlier. That included a loss on the recent deals to sell assets in Morocco and a higher cost of risk, mainly due to provisions on doubtful loans.
Daimler Truck Earnings, Revenue Beat Forecasts Despite Sales Drop
Daimler Truck posted stable revenue and higher earnings ahead of forecasts in the first quarter despite a decline in sales and production.
The German truck and bus maker on Friday backed its full-year guidance but said the market is cooling and warned of unidentified hurdles ahead.
Credit Agricole Expects to Achieve 2025 Target Early After Earnings Surge
Credit Agricole posted a rise in first-quarter earnings that beat expectations on revenue growth across all its business lines and said it would reach its 2025 medium-term targets by the end of this year.
France's second-largest listed lender said Friday that its net profit for the first three months of the year rose to 1.90 billion euros ($2.04 billion) from EUR1.23 billion in the prior-year period.
Danske Bank Backs Guidance as Earnings Meet Forecasts
Danske Bank backed its full-year guidance after reporting in-line first-quarter earnings amid strong credit quality and negligible impairments.
The Copenhagen-based bank on Friday posted a net profit of 5.63 billion Danish kroner ($809.7 million), up from DKK5.17 billion, as net interest income rose 14% to DKK9.14 billion. A company-compiled consensus had seen net profit at DKK5.58 billion with net interest income of DKK9.25 billion.
Legrand Profit Falls After Construction Sector Slowdown
Legrand posted a decline in profit for its first quarter following a slowdown in the construction sector, but confirmed its outlook for the year.
The French electrical and digital building infrastructure manufacturer on Friday posted a net profit for the three months ended March of 275.9 million euros ($295.9 million), down from EUR330.5 million of the same period the prior year, on sales that declined to EUR2.03 billion from EUR2.15 billion.
U.K. Store Footfall Plunges as Wet Weather and Easter Absence Weigh
U.K. retail footfall declined sharply in April on unseasonably wet weather and the earlier Easter timing, pointing to continued struggles for the sector, a monthly report said Friday.
The number of visits to stores-comprising high-street, retail-park and shopping-center data-for the four weeks ended April 27 tumbled 7.2% compared with the same period a year earlier, according to the British Retail Consortium and Sensormatic Solutions IQ.
GLOBAL NEWS
Biden's Fraught Candidacy Faces Twin Threats at Home and Abroad
President Biden's fragile bid for a second term is under new threat from the powerful combination of two conflicts he has little direct control over: Israel's war with Hamas and the deepening rift in the U.S. over America's role in it.
(MORE TO FOLLOW) Dow Jones Newswires
05-03-24 0522ET
