MARKET WRAPS
Stocks:
Stocks made modest gains in Europe on Friday as investors looked ahead to the U.S. jobs report, and reflected on persistent anxieties on Wall Street about regional banks and the economic outlook.
"A strong, or in line [jobs] number today, along with next week's April CPI, will shape the [Fed policy] discussion, but for now, even with the current banking turmoil, the timing of when the Fed starts cutting is likely to shape market direction from here on in," CMC Markets UK said.
Stocks on the Move
Shares in Adidas furthered their rally after the sportswear group said first-quarter organic sales remained stable on the year and that high inventory levels have eased to some extent.
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Shares in IAG rose sharply after the British Airways owner said strong demand continued across the group, as it posted a surprise first-quarter profit and raised its earnings guidance.
Post-ECB Insight
The European Central Bank's decision confirms determination to fight inflation, but might also signal it is entering into the last phase of its monetary cycle, Amundi said.
"The ongoing tightening of credit conditions seems to have triggered the shift to a slower pace."
Amundi prefers U.S. rates overall, and still prefers a small short duration on the Euro curve considering the stickiness of inflation.
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The market pricing of the ECB's terminal rate is too dovish again, Societe Generale said.
Money market forwards price the ECB's peak deposit rate at around 3.6%, according to Refinitiv. Societe Generale's economists expect three further 25 basis-point rate rises, bringing the terminal deposit rate to 4% in September, as inflation remains sticky in the eurozone.
However, the last interest-rate rise in September would be only in the deposit rate, which would narrow the corridor between the main refinancing rate and the deposit rate to 25bps from 50bps currently, SocGen said.
"Note, however, that the ECB may well start narrowing this corridor sooner."
Read Danske Tweaks ECB Rate Forecasts but Keeps 4% Peak Rate View
Read Sticky Core Inflation to Keep ECB on Tightening Path
U.S. Markets:
Stock futures inched higher as investors cheered Apple's earnings, monitored regional banks and awaited the monthly jobs report.
Stocks on the Move
Premarket trading pointed to a big decline for Lyft, after the latest earnings report from the ride-hailing company. But Apple, Carvana, Coinbase and DraftKings all look set to rally post-results.
Regional banking stocks regained some ground after sliding on Thursday despite assurances from the Federal Reserve that the financial system is on a solid footing. PacWest rose 13% before the bell. Western Alliance added 9%.
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Forex:
A growing divergence between the rate outlooks of the Fed and ECB "builds a stronger case for a significantly higher euro against the dollar," Swissquote said.
"Price pullbacks continue to be interesting opportunities to strength long positions in the single currency," it added.
Christine Lagarde "left the door wide-open to more rate hikes in the coming months," whereas U.S. banking stresses are fuelling speculation of Fed rate cuts in the second half of this year, perhaps as early as July, Swissquote said.
TD Securities said sterling is mainly being driven by risk sentiment and the dollar as another interest rate rise by the Bank of England on May 11 is fully priced in, as GBP/USD hits an 11-month high and EUR/GBP falls to a four-week low.
Improving U.K. growth has provided some sterling support, but it's "started to deviate from some of our short-term models," TD said.
"While that won't matter too much if weaker U.S. data pulls the dollar lower, lifting sterling and others, it would reinforce EUR/GBP support ahead of the 200 daily moving average, as the euro looks cleaner."
Bonds:
Eurozone government bond yields edged higher, reversing some of Thursday's moves, as investors acknowledged the ECB's message of more interest-rate rises.
MFS Investment Management said it was cautious in starting new steepening trades in core euro curves, adding the market will wait until signs of moderation in core inflation before starting to price in rate cuts by the ECB.
"That said, a more neutral duration stance makes sense given the wider backdrop."
MFS added: "The ECB's tone on inflation remains hawkish but it seems that data are consistent with no upward revisions for inflation in the medium term are on the cards."
Energy:
Oil futures were close to 2% higher but remained on course for a third consecutive weekly decline as fears about demand have battered prices.
Attention is turning to OPEC+ following the sharp falls, with the group due to meet early next month in person to decide on production levels. At their last in-person meeting they opted to slash output by 2 million barrels a day.
"Clearly, if the current downward trend continues in prices, the group would likely be forced to make further supply cuts," ING said.
Metals:
Base metals and gold were largely unchanged ahead of the nonfarm payroll data, with investors looking to key economic indicators to see how the U.S. economy is faring amid rising interest rates.
Deutsche Bank said the employment report will be an important one for the Fed as it considers whether to pause on interest rate hikes.
"Our U.S. economists at Deutsche Bank are looking for nonfarm payrolls to have grown by 150,000, which if realized would actually be the slowest monthly growth since December 2020."
DOW JONES NEWSPLUS
EMEA HEADLINES
German Manufacturing Orders Fell by More Than Expected in March
New orders at German factories tumbled more than expected in March, signaling sliding demand for manufacturers as concerns over the health of the global economy mount.
Manufacturing orders decreased 10.7% in March on month after rising by a downwardly revised 4.5% in February, according to price-adjusted data released Friday by the German statistics office Destatis.
IAG Expects Continued Strong Demand Across Airlines After Swing to 1Q Profit
International Consolidated Airlines Group said Friday that strong demand continued across all its airlines as it reported a swing to a first quarter operating profit that beat consensus, and raised its guidance.
Adidas Shares Climb After 1Q Sales Proved to Be More Robust Than Feared
Shares in Adidas furthered their rally Friday after the group said first-quarter sales remained stable on the year, and that high inventory levels have eased to some extent.
At 0723 GMT, shares were up 6.2% at EUR166. Year-to-date, the share has risen some 30%, reversing some of the steep declines it suffered last year.
Air France-KLM Lowers Capacity Forecast Ahead of Busy Summer
Air France-KLM slightly reduced its capacity forecast for the year ahead of what looks set to be a busy summer thanks to strong ticket sales that fed into higher revenue for the first quarter.
The Franco-Dutch carrier group on Friday posted revenue of 6.33 billion euros ($6.97 billion) for the three months to the end of March, up 42% on year.
Telecom Italia Says Bids for Fixed-Network Assets Aren't Yet Adequate
Telecom Italia said nonbinding offers it has received for its fixed-network assets from KKR and from a consortium formed by Cassa Depositi e Prestiti and Macquarie Group aren't yet adequate.
The Italian telecommunications company said late Thursday that at least one of the bidders expressed willingness to improve its offer and that TIM's board gave it until June 9 to submit a final offer. TIM didn't specify which suitor, and it didn't disclose the terms of the offers.
CaixaBank Reports Higher 1Q Net Profit, Beating Expectations
CaixaBank said Friday that its first-quarter net profit rose, as higher interest rates boosted net interest income, against analysts' expectations of a profit decline.
Net profit for the first three months of the year was 855 million euros ($941.5 million) compared with EUR706 million in the year-earlier period, the Spanish bank said.
Clariant backs full-year views despite demand slump
Clariant on Friday reiterated its outlook for 2023, despite booking lower sales and profitability in the first quarter.
The Swiss chemicals group CH:CLN booked a 5% organic sales decrease to 1.20 billion Swiss francs ($1.35 billion,) close to analysts' expectations for CHF1.24 billion, according to a poll of estimates compiled by FactSet.
Russia Accuses U.S. of Helping Kyiv to Plan Kremlin Attack
Moscow accused the U.S. of organizing this week's drone attack on the Kremlin, while Washington denied any involvement and began its own investigation into what happened.
Speaking in Moscow, Kremlin spokesman Dmitry Peskov on Thursday promised a "balanced response" and dismissed suggestions from Ukraine that Russian President Vladimir Putin's domestic opponents were behind Wednesday's incident. White House press secretary Karine Jean-Pierre added to the doubts Wednesday, saying that Russia has a history of carrying out so-called false-flag attacks.
Turkey's Earthquake Victims Could Decide the Coming Election
MERSIN, Turkey-Muzeyyen Bahap plans to travel nearly 200 miles to vote in Turkey's coming presidential election on May 14.
She is one of the millions of Turkish voters who were displaced by a massive earthquake that struck swaths of the country and could play a decisive role in an election that could mark the end of President Recep Tayyip Erdogan's 20 years in power.
GLOBAL NEWS
Is the Fed Done Raising Rates?
Federal Reserve officials this past week raised interest rates to a 16-year high and signaled they might be done hiking them for now. But they didn't say exactly how they will know when they have reached that point.
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05-05-23 0553ET
