European Midday Briefing: Solid U.S. Tech Earnings Lift Mood; PCE Print Awaited

MARKET WRAPS

Stocks:

European shares advanced on Friday, with the technology sector boosted by strong earnings from Microsoft and Alphabet. Miners were also firmer, as copper hit $10,000 a ton for the first time in two years.

Some well-received earnings from NatWest and Remy Cointreau helped support sentiment, while M&A news from Anglo American and Darktrace headlined a busy corporate slate.

Investors' attention was also focused on the latest U.S. PCE print, the Federal Reserve's preferred inflation gauge. The data for March is due at 1230 GMT.

"The fear is to see a higher inflation print, which would further batter the Fed cut expectations," Swissquote Bank said.

"But the 'good' news is, it looked like yesterday's price action already embedded today's core PCE print. Therefore, bad news are at least partially priced in."

U.S. Markets:

Stock futures were rising, led by contracts tied to the tech-focused Nasdaq-100.

As well as the PCE price index release, earnings are due from Exxon Mobil and Chevron.

Stocks on the Move

Microsoft shares were around 4% higher premarket after it posted higher revenue and profit in its fiscal third quarter as AI bolstered demand for its software and cloud services.

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 at 1230 GMT.

The 10-year U.S. Treasury yields has risen 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.

EMEA HEADLINES

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.

TotalEnergies to Buy Back $2 Bln of Shares After Net Profit Rises

TotalEnergies reported an increase in net profit in the first three months of the year, exceeding analysts' expectations, and said it would buy back $2 billion of shares this quarter.

The French oil and gas company said net profit was $5.72 billion compared with $5.56 billion a year ago. On an adjusted basis, net profit came to $5.1 billion, a 22% on-year decrease, largely due to softened natural gas prices.

Traton Sales Beat Forecasts on Better Pricing, South America Growth

Traton posted sales above expectations for the first quarter, boosted by stronger pricing and market growth in South America, and despite slower momentum in the European truck business.

The Volkswagen-owned commercial-vehicle maker on Friday reported sales revenue of 11.80 billion euros ($12.66 billion), up 5% on year.

Thyssenkrupp to Sell 20% Stake in Steel Business to Kretinsky's EP

Thyssenkrupp agreed to sell a 20% stake in its steel business to Czech billionaire Daniel Kretinsky's EP Corporate Group for an undisclosed sum, settling on a partial divestment of the unit after yearslong efforts to offload it.

The German industrial group said Friday that the two companies are discussing the potential acquisition by EP of a further 30% stake in the steel business with the aim of forming an equally owned joint venture.

Safran Revenue Beats Forecasts on Postpandemic Air Traffic Recovery

Safran posted revenue above analysts' expectations for the first quarter, led by growth across all units as the postpandemic recovery in air traffic continues.

The French aerospace-industry supplier on Friday reported adjusted revenue of 6.22 billion euros ($6.67 billion), up 18% in reported terms and 19% organically.

SKF Expects Lower Sales in Second Quarter After Earnings Meet Expectations

Swedish ball-bearing maker SKF expects sales to fall in the second quarter, with market volatility and geopolitical uncertainty continuing.

SKF said Friday that its first-quarter net profit fell to 1.89 billion Swedish kronor ($173.7 million) from SEK2.07 billion a year earlier, while sales fell 7% to SEK24.7 billion.

GLOBAL NEWS

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%.

Don't Panic. Weaker GDP Isn't a Reason to Bail on Stocks.

April showers famously bring May flowers. But this month's market storms may be bringing investors something even prettier-a buying opportunity for stocks.

The recent volatility on Wall Street is creating concerns about the strength of the economy and leading to questions about just how much longer this bull market can last. But savvy investors should filter out the noise, especially after Thursday's market drop following the lower-than-expected rise in gross domestic product for the first quarter.

The Dream of Fed Rate Cuts Is Slipping Away

Thursday's report on economic activity delivered the latest in a series of rude awakenings to investors and Federal Reserve policymakers who have held their breath in anticipation that lower inflation would allow interest-rate cuts to begin in earnest this summer.

Instead, Commerce Department data showed that, for the third straight month, inflation was proving stickier than expected after an immaculate cooling in the second half of last year.

The Thrill Factor Is Back for Retail Investors

The rally that powered stocks higher for much of this year made everyday investors excited about trading again.

Amateurs flocked to trading platforms during the pandemic but pulled back in 2022 when the market dropped. When stocks climbed to new highs in 2024, many jumped back in-and had fun trading once more.

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.

States Take On China in the Name of National Security

States have a new adversary: China.

From Florida to Indiana and Montana, an expanding array of local proposals, bills, laws and regulations aim to block Chinese individuals and companies from acquiring land, winning contracts, working on research, setting up factories and otherwise participating in the U.S. economy.

Write to paul.larkins@dowjones.com

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

April 26, 2024 05:32 ET (09:32 GMT)

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