MARKET WRAPS

Watch For:

EU retail sales; Industrial Production data for Germany, France; trading updates from Shell, SAS

Opening Call:

European stock futures were muted early Friday. Asian stock benchmarks and U.S. Treasury yields were mixed; the dollar weakened slightly; oil futures and gold edged lower.

Equities:

Stock futures were little changed early Friday. Exit polls have projected Keir Starmer's Labour Party to vault back to power in the U.K. for the first time in 14 years.

Focus is the U.S. nonfarm payrolls report later today to gauge whether weakening economic growth could give the Fed room to lower rates as soon as September and on the second round of French elections on Sunday.

"There have been gains [in shares] for some of the U.K.'s biggest banks and homebuilders, the latter are rising on the back of expectations that they will receive incentives from the next government to build more homes, while gains for the banks suggests that the market may also think the likely change in government could be good for the U.K.'s economy," said Kathleen Brooks, research director at XTB.

Investors were more at ease with the outlook in France, where polls suggest the far-right National Rally party won't win an overall majority in parliamentary elections set for Sunday.

Markets in the U.S. were closed Thursday for the Independence Day holiday.

Meanwhile, minutes of the Fed's June policy meeting published Thursday left open the question of when the first interest-rate cut could come, while fresh data showed U.S. weekly jobless claims rose.

Forex:

EUR/USD was steady ahead of the second round of French elections due Sunday.

The currency pair's surge beyond the 1.0800 level this week seems built on relief that the National Rally's victory in the French elections' first round won't translate into an outright majority during the second round, said Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank.

There's also relief that the National Rally has become less extreme and more business-friendly, Varathan said but added that relief-linked EUR gains could be difficult to extend, given "dire" industrial data out of Germany recently.

--

GBP/USD was also steady. Markets have "warmed" to the idea that the opposition U.K. Labour Party's projected landslide victory could end years of political and economic uncertainty under the Conservative Party, said Philip Wee, senior FX strategist at DBS Group Research.

Although Labour Party leader Starmer has ruled out the U.K. rejoining three blocs--the EU, the single market, or the customs union--within his lifetime, his party may seek better trading arrangements by signing up to EU rules in certain sectors such as agriculture, food, and chemicals, Wee added.

ING said that the U.K. Labour Party's projected landslide win, as indicated by exit polls, was mostly priced in.

However, the Bank of England's monetary-policy plans remain the most important domestic driver for GBP, with ING's call for an August cut the main reason for a likely weakening in GBP, it added.

Bonds:

Issuance of euro-denominated corporate bonds could decline in the second half of 2024 after heavy supply in the first half, ING said.

"Supply has been significant in the first half of the year - with front loading in order to take advantage of the large demand, relatively tight spreads," it said adding that rising geopolitical concerns and the upcoming U.S. elections are likely to limit issuance of corporate bonds in 2H.

Energy:

Oil prices moved lower after tracking higher early Friday buoyed by a large fall in crude stockpiles. Earlier this week, the Energy Information Administration had reported that U.S. crude inventories declined by a bigger-than-expected 12.2 million barrels for the week ending June 28.

However, the latest poor growth signals from China, such as the weak Caixin PMI on Wednesday, were helping to pull oil prices in the opposite direction, said Ray Attrill, head of FX strategy at National Australia Bank.

Metals:

Gold prices eased in Asia. But political risks continue to support the appeal of gold, particularly amidst the ongoing elections in Europe and escalating geopolitical tensions in the Middle East, George Pavel, general manager at online trading platform Capex.com Middle East said.

--

Copper was higher in Asian trade. Market sentiment was buoyed by expectations of [Fed] easing monetary policy, ANZ research analysts said.

Sentiment was also lifted by a withdrawal of copper inventories from the LME warehouse, they said, adding that China's economic outlook also supported the view that copper demand may recover in 2H.

--

Iron ore prices declined as investor sentiment over potential property sector stimulus in China before the Third Plenum seemed to be priced in.

The metal's rising inventories at ports may also pressure prices, ANZ Research analysts said. The fundamentals of iron ore haven't changed much, ANZ added.


TODAY'S TOP HEADLINES

Tony Blair's Party Is on the Cusp of a Huge Election Win. What it Means for Markets.

U.K. voters are poised to deliver a sweeping election victory to the Labour Party akin to former Prime Minister Tony Blair's landslide win in 1997. If history is anything to go by, that could be a boon for stocks and bonds based on how markets have performed after past elections.

The FTSE 100 index rose 4% in the month after Blair was put in office and 35% in the following 12 months. Interest rates also fell-the benchmark 10-year U.K. bond yield fell 1.6 percentage points over the period. And similar to then, this week's vote promises to bring sweeping change. The Conservative Party has been in power for 14 years. When Blair took over, the Conservatives had been governing for 18 years. He went on to serve as prime minister for 10 years.


Wall Street Bids Adieu to Its Biggest Bear

Marko Kolanovic found himself in the loneliest place on Wall Street.

A robust stock-market rally that started early in 2023 caught many investors by surprise. But as other big-bank analysts relented one by one, adjusting their forecasts higher, Kolanovic, JPMorgan Chase's top market strategist, doubled down on his bearish outlook. Stocks kept rallying, with major indexes hitting new highs again this week.


Why Trump's running-mate choice could matter for oil companies, banks, tech and other sectors

As Donald Trump gets closer to announcing his pick for running mate, the presumptive Republican presidential nominee's decision on his No. 2 could end up having an impact on industries.

For example, one running-mate candidate - North Dakota Gov. Doug Burgum, whose state is a major oil and gas producer - could help Trump implement the fossil-fuel policies that the former president has long espoused. That's according to Jeff Hauser, founder and executive director of the Revolving Door Project, a watchdog organization that tracks corporate influence on the executive branch.


Canada Approves Glencore-Led Deal for Teck Coal Assets

OTTAWA-Canada approved late Thursday a Glencore-led $9 billion deal to acquire coal assets from Teck Resources, after officials secured commitments from both companies about additional investment in the country.

Furthermore, Canada's industry minister, François-Philippe Champagne, said pending approvals of foreign-led deals involving critical minerals would only be granted in "the most exceptional of circumstances."


U.K. Labour Party On Track for Landslide Victory, Says Exit Poll

LONDON-Britain's Labour Party is on course to win a landslide election victory, according to an exit poll published Thursday, as voters look set to hand its leader Keir Starmer one of the biggest parliamentary majorities in British history and place a center-left government into Downing Street for the first time in 14 years.

The exit poll predicted that Labour will win 410 of the 650 seats in parliament. The ruling Conservative Party is on course to win just 131 seats, likely the worst result in its 190-year history and a massive reversal on its victory in the last election in 2019. A clutch of other, smaller parties are also tipped to do well, as voters become disillusioned with mainstream politics.


Iran's Election Features a Reformer, a Hardliner and a Crisis

Iran's presidential election runoff Friday presents a stark choice between an anti-Western hard-liner and a reformist. Most Iranian voters are expected to want neither-a sign of the widespread rejection of a system that has brought arduous moral restrictions, an economic slump and a crisis of legitimacy.

Reformist candidate Masoud Pezeshkian drew 43% of the vote in the first round against 39% for conservative Saeed Jalili, setting the stage for Friday's runoff to succeed President Ebrahim Raisi, who was killed in a helicopter crash in May. Around 60% of Iran's voters stayed away in the first round, disillusioned that their choice would make a meaningful difference.


Biden Presses Netanyahu to Close Cease-Fire Deal After Talks Show Progress

An embattled President Biden pressed Prime Minister Benjamin Netanyahu to hammer out a Gaza cease-fire deal, telling the Israeli leader in a phone call on Thursday that now is the time to save the lives of hostages held by Hamas.

Biden talked through with Netanyahu a draft agreement that reflects significant changes from the Hamas side that boost the chances of a deal, according to a senior Biden administration official.


Samsung Electronics Expects Surge in Second-Quarter Profit

Samsung Electronics forecast a surge in second-quarter earnings, suggesting that its flagship semiconductor business sustained a strong recovery after a turnaround in the first quarter.

The South Korean technology giant said in a preliminary earnings report Friday that its quarterly operating profit is expected at 10.400 trillion won ($7.52 billion), a nearly 16-fold increase from KRW670.00 billion a year earlier.


EU Confirms Tariffs on Chinese-Made EVs

(MORE TO FOLLOW) Dow Jones Newswires

07-05-24 0015ET