OPENING CALL
Stock futures were slightly firmer on Friday and Treasury yields eased back from highs of the year, with early trader focus on the Federal Reserve's favored inflation gauge.
The personal consumption expenditure price index report, which is due for release at 8:30am, is expected to show core inflation rose 0.3% in March, month-on-month, the same increase seen in February.
Investors will be keen to see if the report matches the signs of sticky inflation within Thursday's GDP data, which helped push Treasury yields to fresh highs for 2024 on fears fewer Fed interest rate cuts than recently hoped may occur this year.
Markets are pricing in a 98.8% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its meeting next Wednesday.
"So futures are now pricing the most hawkish profile we've seen to date in this hiking cycle, at least in terms of where rates are set to be by the end of 2024," Deutsche Bank said.
"Indeed for the first time, the first 25bp cut isn't fully priced in until the December 2024 meeting."
Premarket Movers
Alphabet said quarterly profit jumped by more than half and announced its first cash dividend. Shares rose 11%.
Intel reported a quarterly loss and disappointing outlook amid a multi-year turnaround effort. Shares fell 7%.
Microsoft reported quarterly results that beat Wall Street estimates for sales and revenue. Shares rose 4%.
Snap reported 21% revenue growth in the first quarter, blowing past market expectations and its own guidance. Shares rose 23%.
Watch For:
Personal Income and Outlays for March; University of Michigan Final Consumer Survey for April; earnings from Chevron, Exxon Mobil
Today's Headlines/Must Reads:
- Google and Microsoft Cushion Their AI Capital Pains
- Weaker GDP Isn't a Reason to Dump Stocks
- The Thrill Factor Is Back for Retail Investors
- States Take On China in the Name of National Security
MARKET WRAPS
Forex:
The yen hit a new 34-low in European trading against the dollar after the Bank of Japan left interest rates unchanged, as broadly expected, while inflation for the city of Tokyo came in lower than expected.
Soft Tokyo inflation-a gauge for Japan's overall inflation-is likely to keep the BOJ cautious when it comes to potential further tightening after a rate hike in March, analysts said.
The dollar was steady against a basket of currencies but could turn higher later in the day, ING said.
The currency turned lower even as Thursday's U.S. data showed a bigger-than-expected slowdown in first-quarter GDP but core PCE inflation well above forecasts, further dimming U.S. rate-cut expectations.
ING said the dollar "should be trading higher" and is likely to rebound as it relinks with moves in rates. "It would not be the first time that the dollar reconnects with rates and equities with a small lag. We think this is likely to happen today or early next week."
Bonds:
The 2.75%-3% area is in sight for Bund yields after they broke above 2.50%, Societe Generale Research said.
Given that bond yields could rise further, SocGen recommends that investors wait for the selloff momentum to calm down before reconsidering buying on "dips."
For the Bund yield going beyond the 2.75%-3% area would require either almost abandoning rate cuts or a substantial repricing of term premium-the yield premium that investors demand for holding a longer-dated bond rather than a shorter-dated one, SocGen said.
Treasury yields remained at multi-month highs they reached on Thursday.
"A higher-than-expected U.S. inflation print [Thursday] is likely to be followed by another one today," ING said, referring to the release of March PCE inflation data.
The 10-year yield rose just above 4.70% on Thursday, the highest level since November, "and there is no sense that it looks mispriced," ING said.
Energy:
Oil prices edged higher ahead of key U.S. inflation data that will offer more cues on the path of interest rates.
Metals:
Copper futures topped $10,000 a ton, hitting a two-year high, buoyed by sanctions on Russian metals, tighter individual market fundamentals and an overall improvement in the health of the global economy, BMI said.
Gold futures continued to rise on safe-haven demand.
However, renewed dollar strength and a pushback in market expectations for the first Federal Reserve interest-rate cut will cap the rally in gold prices, given their non-interest bearing characteristics, BMI said.
If Middle East tensions stay at the status quo, expect gold prices to face some resistance at the $2,400 level, with further escalations pushing prices higher, BMI said.
TODAY'S TOP HEADLINES
Anglo American Rejects $39 Billion BHP Bid, Setting Up Likely Bidding War
LONDON-Anglo American on Friday rejected a $39 billion takeover proposal from rival BHP, saying the bid "significantly undervalues" the company and setting the stage for a potential bidding war.
London-listed Anglo American said the unsolicited proposal, which was made earlier this month and which became public this week, features an unattractive structure that is too uncertain and complex.
CVC Capital Partners Shares Soar in First Day of Amsterdam Trading
CVC Capital Partners shares jumped on the company's first day of trading on Amsterdam's stock exchange.
The stock opened at EUR17.34, 24% higher than its floating price of EUR14.
Thoma Bravo to Buy U.K. Cybersecurity Company Darktrace for $5.3 Billion
Thoma Bravo said it plans to buy cybersecurity company Darktrace for about $5.31 billion.
The U.S. private equity firm said Friday that it reached a cash deal with the U.K. company that will result in Darktrace shareholders receiving $7.75 a share.
ByteDance Says It Won't Sell U.S. TikTok Business
China's ByteDance said it won't sell its U.S. TikTok business, a day after President Biden signed legislation that could force the company to sell the popular video-sharing platform or stop operating in the U.S.
ByteDance said late Thursday on Toutiao, a media platform it owns, that reports that it is exploring the sale "are untrue." The company was responding to a report by the Information that it is considering selling a majority stake in TikTok's U.S. business without the algorithm it uses to recommend videos to users.
Bank of Japan Holds Rates Steady, Expects Inflation to Stay Around 2%
TOKYO-The Bank of Japan left its interest-rate target unchanged Friday, a month after it made its first rate increase in 17 years.
The Japanese central bank maintained its target for the overnight call rate at a range of 0% to 0.1%.
Trump Allies Draw Up Plans to Blunt Fed's Independence
WASHINGTON-Donald Trump's allies are quietly drafting proposals that would attempt to erode the Federal Reserve's independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank's authority.
Former Trump administration officials and other supporters of the presumptive GOP nominee have in recent months discussed a range of proposals, from incremental policy changes to a long-shot assertion that the president himself should play a role in setting interest rates. A small group of the president's allies-whose work is so secretive that even some prominent former Trump economic aides weren't aware of it-has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter.
Blinken Meets With Xi as U.S. Pressures China to End Support for Russia
BEIJING-Secretary of State Antony Blinken met with Chinese leader Xi Jinping on Friday as the U.S. urged Beijing to cut back on his nation's extensive support for Russia's defense industry.
The tone of Washington's relations with Beijing has improved markedly since a Chinese balloon drifted over the U.S. in early 2023, prompting American allegations about Chinese espionage.
Supreme Court Appears Open to Some of Donald Trump's Immunity Claims
WASHINGTON-The Supreme Court, hearing a last-ditch appeal from Donald Trump, appeared open Thursday to granting some level of immunity to protect former presidents from being prosecuted for alleged crimes committed while in office.
Over nearly three hours of oral argument, the court's conservative majority expressed greater concern that a future president might flinch from bold action for fear of prosecution than the possibility that Trump could avoid accountability on charges he attempted to steal the 2020 presidential election from Joe Biden.
OpenAI's Sam Altman and Other Tech Leaders to Serve on AI Safety Board
WASHINGTON-Sam Altman of OpenAI and the chief executives of Nvidia, Microsoft and Alphabet are among technology-industry leaders joining a new federal advisory board focused on the secure use of artificial intelligence within U.S. critical infrastructure, in the Biden administration's latest effort to fill a regulatory vacuum over the rapidly proliferating technology.
The Artificial Intelligence Safety and Security Board is part of a government push to protect the economy, public health and vital industries from being harmed by AI-powered threats, U.S. officials said.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings [1Q Unless Stated]:
Imperial Oil
Economic Calendar:
None scheduled
Stocks to Watch:
TWC Enterprises 1Q Loss C$701,000; Loss/Shr C$0.03
Expected Major Events for Friday
00:30/JPN: Mar Detailed Import & Export Statistics
06:45/FRA: Apr Consumer confidence survey
08:30/UK: Mar Monthly Insolvency statistics
08:30/UK: Mar Capital issuance statistics
08:59/JPN: Japan Monetary Policy Meeting decision
12:30/US: Mar Personal Income and Outlays
14:00/US: Apr University of Michigan Survey of Consumers - final
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Friday
(MORE TO FOLLOW) Dow Jones Newswires
04-26-24 0625ET
