MARKET WRAPS

Watch For:

Canada Retail Sales for February; Canada Product & Raw Materials Price Indexes for March; earnings from American Express, Verizon Communications

Opening Call:

Stock futures wavered Friday, as investors continued to digest comments from Jerome Powell signaling future interest-rate rises.

The prospect of rate increases from the Federal Reserve this year and next and a reduction in the central bank's bond holdings remains a key pressure for stocks, as the Fed readies to fight historically high inflation with tighter monetary policy.

Remarks from Powell Thursday indicated the Fed would likely raise interest rates by a sizable half-point in May.

"With the Fed's May communications blackout set to start tomorrow, Powell stayed true to the recent Fed line, saying many FOMC participants favored one or more +50 basis-point moves, noting that it would be appropriate to move relatively quickly, and that he wanted to get policy rates to neutral," said Jim Reid, a strategist at Deutsche Bank.

Overseas, the pan-European Stoxx 600 fell 0.8% and Tokyo's Nikkei 225 retreated 1.6%.

Forex:

The dollar, up around 0.2% in Europe, looks set to remain strong for most of the year, said ING, after Jerome Powell confirmed that interest rates are likely to rise in bigger increments than the usual 25 basis points.

"Do not try to fight the strong dollar bull trend. The jury is out on how high the Fed will take rates, but with the terminal rate for Fed funds being priced higher each day [now at 3.35%] it seems far too dangerous to try and pick a top."

ING added that the DXY Dollar Index "can probably hold above 100."

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Weak U.K. data has added to growing reasons to sell the pound, said MUFG analyst Derek Halpenny, as sterling fell to its lowest in nearly 18 months against the dollar.

GfK's U.K. consumer confidence measure has dropped to its lowest since the 2008-09 financial crisis, while U.K. retail sales fell 1.4% during March, much more than the 0.2% loss anticipated in a WSJ poll.

These add to "a host of specific negative developments providing reason for GBP sentiment to worsen over the coming days and weeks," including pressure on Boris Johnson to stand down, Halpenny said.

Other News:

Japanese investors tend to dump foreign holdings and bring cash home in times of market stress. But that safe-haven status is being tested by the widening gap between rising global yields and those in Japan, where the central bank remains committed to its ultra-easy policy.

"We expect domestic Japanese investors will be looking to park their money elsewhere instead of repatriating back into yen," Ian Samson, multi-asset portfolio manager at Fidelity International, told WSJ.

The 10-year Treasury has a yield of 2.934%, while its equivalent in Japan is capped at 0.25%. The yen has fallen 11% against the dollar this year.

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Janet Yellen and Japan's Finance Minister Shunichi Suzuki discussed a potential coordinated yen-buying intervention at a meeting in Washington, major Japanese broadcaster TBS reported Friday citing an unnamed Japanese source.

At the meeting, that lasted about half an hour, they discussed foreign-exchange movements and economic conditions of the U.S. and Japan, the TBS report said.

Bonds:

Bond yields continued to climb to new multiyear highs, with the yield on the benchmark 10-year Treasury note at 2.953% Friday.

Commodities:

Oil prices were lower in Europe but had pared earlier, steeper losses, as investors worried about interest-rate hikes hitting demand.

Morgan Stanley has raised its oil prices forecasts despite expecting weaker global economic growth, as supply issues caused by the war in Ukraine are likely to be greater than expected.

The bank has added $10 to its Brent forecasts for the third and fourth quarters, expecting $130 a barrel and $120 a barrel, respectively.

Demand for oil will likely weaken as global growth slows in the face of the Ukraine war, resurgent Covid-19 cases in China, and interest rate hikes in the U.S. But that is expected to be more than offset by supply issues. Russian supply has likely fallen by more than expected since the war's outbreak while there remains a risk of an EU ban on Russian crude, Morgan Stanley said.

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Gold futures moved higher in early European action after hawkish comments from Jerome Powell came against a tide of inflation and other economic growth worries, helping to push investors toward the precious metal.

"Bullion provides a good hedge against hyperinflation, which creates risks to holding traditional assets. Still, with stagflation moving from a potential tail risk to reality, investors worldwide are turning to gold as a keen portfolio diversifier," said Stephen Innes, managing partner at SPI Asset Management.

Goldman Sachs has a year-end gold target price of $2,500 an ounce due to high demand. It said the "gold ETF build continues, Chinese gold premium remains strong, Russia is likely buying up all domestic gold production and [developed-market] retail gold purchases are running at record high levels."

If strength in physical-investment demand continues, gold has to eventually rise to price out consumers and make room for investors, Goldman Sachs said.

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Base metals were broadly flat as supply worries balanced out consumption concerns in Asia that had pushed prices down over the last week, with copper seeing a third consecutive week of losses.

But a raft of supply concerns from miners Thursday helped to balance out the weakening sentiment--20% of Peru's copper mining industry has moved into force majeure because of local protests, while aluminum smelters battle with rising energy costs.


TODAY'S TOP HEADLINES


Conagra CFO Ramps Up Analysis of Commodities, Trucking Data to Fight Inflation

Conagra Brands Inc.'s finance chief is spending more time analyzing data on the availability of trucks and chicken as the company calculates future price increases.


Home Depot Revamps Tech Leadership With Focus on Customers

Home Depot Inc. is doubling down on online shopping, curbside pickup apps and other digital efforts that helped propel sales during the Covid-19 pandemic, shifting its veteran chief information officer to a new full-time executive role overseeing customer technology.

The home-improvement retailer was an early winner during the pandemic, when locked-down consumers turned to do-it-yourself projects around the home. Home Depot was among a group of companies that benefited from demand created by the lockdown.


SAP to Take Extra Costs From Russian Pullback as 1Q Profit Fell

SAP SE said Friday that it would take further costs from its pullback from Russia after first-quarter profit fell, though kept its full-year outlook after cloud-revenue growth accelerated.

Reporting on a non-IFRS basis, the German cloud-computing company's quarterly operating profit was 1.68 billion euros ($1.82 billion), down from EUR1.74 billion last year, which it blamed on expenses related to the war, as well as accelerated investments into research & development and sales & marketing.


Gap Replaces Old Navy Leader, Cuts First-Quarter Guidance

Gap Inc. is replacing the head of its Old Navy business and cutting its first-quarter guidance, as increased competition from low-cost rivals forces the value brand to promote more.

Gap on Thursday said Old Navy President and Chief Executive Nancy Green is departing the business this week and an external search is under way. Gap CEO Sonia Syngal will work with the Old Navy team until a new brand president is found, the company said.


Hitachi Transport System Considering Being Taken Private by KKR

Hitachi Transport System Ltd. said Friday that it is considering being taken private by KKR & Co. in a bid to achieve sustainable growth.

Hitachi Ltd., which holds a 39.9% stake in the Japanese logistics company, said it is considering selling its stake in the affiliate.


Russia's War Machine Hurt by U.S. Export Ban, Commerce Secretary Says

WASHINGTON-Export controls implemented by the U.S. and its allies have cut Russia's imports of high-tech goods by more than half-and more export restrictions are being readied, U.S. Commerce Secretary Gina Raimondo said.

The blacklist-which covers products such as semiconductors, telecommunications equipment, lasers, avionics and maritime technologies-has left the Russian military struggling to find parts for tanks, satellites and rocket launching systems, the commerce secretary said. Russia is also short of semiconductors it needs for night-vision goggles and avionics, she said.


Inflation in Japan Is Finally Rising, but the BOJ Will Take It Easy With Monetary Policy

TOKYO-In Japan, where prices have been roughly flat for decades, inflation is finally taking off. But unlike the Federal Reserve in the U.S., the Bank of Japan has resolved to keep interest rates low, helping drive a fall in the yen.

On Thursday, the Japanese central bank resumed another bond-buying move aimed at keeping a lid on rates. It promised to purchase unlimited quantities of government bonds to cap the yield at 0.25%-less than one-tenth the return on the equivalent U.S. Treasury bonds. The notice of intent, which lasts until Tuesday, was enough to push the yield below the cap without any actual purchases Thursday.


Bank of Canada's Tiff Macklem Says Central Bank Needs to Normalize Policy Quickly

OTTAWA-The Bank of Canada needs to raise its benchmark interest rate closer to its neutral level, which is between 2% and 3%, on an expedited basis before pausing to see how the economy responds, Gov. Tiff Macklem said Thursday.

Mr. Macklem said central bank officials will be watching closely the impact that higher rates will have on domestic spending patterns, as they embark on an aggressive set of rate increases to get inflation-which in March rose to a fresh three-decade high-back to the Bank of Canada's 2% target.


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04-22-22 0552ET