North American Morning Briefing: Stock Futures Waver; ECB Rate Decision in Focus

OPENING CALL

Stock futures struggled for momentum on Thursday ahead of an expected interest-rate cut by the European Central Bank.

Traders expect the ECB, under President Christine Lagarde, to move cautiously. Beyond today's expected quarter-point cut, swaps pricing suggests one or two more by year-end, Deutsche Bank said.

Additionally, investors looked ahead to the monthly jobs report, set for Friday, which could provide clues on whether the Federal Reserve might also begin to cut rates soon.

Overseas Markets

Global equity markets broadly gained. Tech stocks including ASML and SAP lifted Europe's Stoxx 600, which also got a boost from luxury stocks LVMH and Kering.

Indexes rose in Japan, Hong Kong and India, where the Sensex is still recovering losses triggered by this week's election surprise. Mainland China's CSI 300 slipped.

Premarket Movers

Five Below cut its profit forecasts, citing the effects of inflation on low-income shoppers. Its shares fell 16%.

Lululemon Athletica said it would buy back more shares and posted better-than-expected quarterly profit and revenue. Its shares rose about 9%.

Nvidia shares rose in heavy trading premarket, a day after its market valuation topped $3 trillion. Its 10-1 stock split is planned for Friday.

Watch For:

Weekly Jobless Claims; Revised Productivity and Costs for 1Q; Trade for April; Canada Trade for April; Netflix full year 2023 AGM webcast

Today's Top Headlines/Must Reads:

- ECB Poised to Beat Fed to Rate-Cut Punch. Why the Timing Is Awkward.

- Chinese Battery Suppliers Tied to Ford, VW Should Be Banned, GOP Lawmakers Say

- Why Lululemon's Stock Is Going Out of Fashion

MARKET WRAPS

Forex:

The dollar could stay stuck within a relatively tight range until Friday's eagerly-awaited jobs data for May, ING said.

Having fallen early in the week, the dollar gained ground after Wednesday's stronger-than-expected ISM services data. However, a fall in Canadian bond yields after a rate cut in Canada also helped to drag down U.S. bond yields with it, limiting dollar gains, it said.

"We'll probably have to wait for tomorrow's May jobs report to see whether the dollar can break out of its trading range, which looks to be 104.00 to 104.65 for DXY."

Energy:

Oil prices rebounded from four-month lows as market watchers viewed the recent sell-off as overdone, despite an unexpected build in U.S. crude and gasoline inventories.

Meanwhile, Saudi Arabia cut its oil selling prices to Asian customers for the first time since February amid uncertainties over demand and robust supply from non-OPEC countries.

Metals:

Gold futures rose, further reclaiming ground lost in late May.

MUFG reiterated that gold is its favorite buy this year on a trifecta of eventual Fed cuts, supportive central bank demand and gold's role as a geopolitical safe haven.

Axis Securities said that any negative surprises in U.S. nonfarm payrolls data due Friday could prompt a shift in the Fed's hawkish tone, potentially driving up bullion prices.

Gold prices, confined to a tight range over the past 10 days, surged after softer ADP jobs data ignited hopes for an imminent rate cut by the Fed, it said. Resistance is firmly established around the $2,380 level, with support positioned at the $2,310 level, Axis said.

TODAY'S TOP HEADLINES

FTC Opens Antitrust Probe of Microsoft AI Deal

The Federal Trade Commission is investigating whether Microsoft structured one of its latest deals with an artificial-intelligence startup to avoid a government antitrust review of the transaction.

Microsoft in March hired Inflection AI's co-founder and almost all of its employees and agreed to pay the startup around $650 million as part of a licensing fee to resell its technology. Inflection's investors were told they would be repaid over time by the sales proceeds.

Meta's AI Project Faces Privacy Complaints in Europe

Facebook and Instagram parent Meta Platforms' new artificial-intelligence project faces complaints from a privacy-focused advocacy group in eleven European countries, highlighting the challenges for big technology groups as they turn to users' data to train its AI tools.

The Noyb-European Center for Digital Rights, a Vienna-based nongovernmental organization, said Thursday that it filed complaints with data-protection authorities in Germany, France, Italy, Spain and other seven countries. The group is urging privacy bodies to stop Meta's project before changes on its privacy policy takes effect on June 26, it said.

Keith Gill's GameStop Trades Pose Conundrum for Market Cops

Keith Gill placed a big bet on GameStop, then single-handedly moved the stock higher by returning to social media. Was that market manipulation?

Lawyers say it is unlikely that the Securities and Exchange Commission could bring a case against Gill, the meme-stock influencer known as Roaring Kitty, based on the facts currently known about his trading.

Hannon's Take: U.S. Government Debt Is A Growing Concern

The changing outlook for the Federal Reserve's key interest rate has been a preoccupation for many policymakers around the world this year. But another concern about the U.S. economy is on the rise - the large and fast-growing government debt.

The surge in U.S. government debt isn't exactly a new phenomenon, but it has reached levels that are threatening to have a big impact on the rest of the world. In 2008, the U.S. accounted for about a quarter of all outstanding debt issued by the governments of rich countries. Now it accounts for about half.

Israel Strikes U.N. School and Shelter in Gaza, Says Hamas Was Operating There

The Israeli military struck what it says was a Hamas facility located in a United Nations school compound in the Gaza Strip, where Palestinian officials say dozens of displaced people sheltering there were killed.

Rescue teams worked to recover bodies overnight into Thursday, according to Wafa, the official news and information agency of the Palestinian Authority, which said that at least 32 people were killed.

Europe's Ascendant Right-Wing Parties Want to Remake the EU. They Can't Agree on How.

Right-wing nationalist parties look set to surge in elections across Europe this week, but the shock wave will travel slowly due to rifts among the political forces.

Many of the parties see former President Donald Trump as a model. They pledge to peel back Brussels' power and shift European Union policy on hot-button issues including migration and climate policies.

Israeli Nationalists, Marching in Jerusalem, Balk at U.S. Cease-Fire Push

JERUSALEM-The marchers waved Israeli flags alongside flags of religious seminaries and banners in support of Donald Trump. Some chanted "Death to Arabs," while others called for tearing down the Al Aqsa Mosque in the heart of this ancient city and rebuilding an ancient Jewish temple in its place.

This year, the young religious nationalists at Israel's annual flag march also called for carrying on the war against Hamas in Gaza, rejecting President Biden's push for a cease-fire that could save some Israeli hostages but might help Hamas to survive.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

Earnings:

Saputo 4Q

Transat A.T. 2Q

Economic Indicators (ET):

0830 Apr International merchandise trade

1000 May Ivey Purchasing Managers Index

Stocks to Watch:

Canaccord Genuity Group 4Q Rev C$409M; 4Q Adj EPS C$0.15; 4Q Loss/Share C$0.07; Chairman David Kassie Won't Seek Re-Election to Board; Kassie to Be Named Chairman Emeritus; Amy Freedman, Jo-Anne O'Connor, Rod Phillips to Leave Board; Names President Dan Daviau as Next Chairman; Names Michael Auerbach as Lead Independent Director; Daviau to Succeed Kassie on Aug. 9

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Fortuna Silver Mines Prices US$150M Offering of Convertible Senior Notes Due 2029; Offering Is Expected to Close Around June 10; Plans to Use Proceeds to Repay Debt, Fund Working Capital, General Corporate Purposes, Fund Repayment of Existing Debentures

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Tourmaline Declares Quarterly Cash Dividend of C$0.32/Shr; Nine Directors Proposed by Management Elected at Annual Meeting; All Other Matters Presented at Meeting, Including Appointment of Auditors, Approved by Shareholders

Expected Major Events for Thursday

02:00/JPN: May Imported Vehicle Sales

06:00/GER: Apr Manufacturing orders

06:00/GER: Apr Manufacturing turnover

08:00/ITA: Apr Retail Sales

08:30/UK: May S&P Global UK Construction PMI

11:30/US: May Challenger Job-Cut Report

12:30/US: 1Q Revised Productivity and Costs

12:30/CAN: Apr International merchandise trade

12:30/US: Apr U.S. International Trade in Goods & Services

12:30/US: 06/01 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: U.S. Weekly Export Sales

13:00/RUS: Weekly International Reserves

14:00/CAN: May Ivey Purchasing Managers Index

14:30/US: 05/31 EIA Weekly Natural Gas Storage Report

16:00/US: May Monthly U.S. Retail Chain Store Sales Index

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: CBI Economic Forecast

23:30/JPN: Apr Household Spending

23:50/JPN: May Provisional Trade Statistics for 1st 20 days of Month

23:50/JPN: May International Reserves / Foreign Currency

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Thursday

ABM Industries (ABM) is expected to report $0.66 for 2Q.

American Software (AMSWA) is expected to report $0.04 for 4Q.

AstroNova Inc (ALOT) is expected to report for 1Q.

Autodesk Inc (ADSK) is expected to report $1.14 for 1Q.

Bridgford Foods Corp (BRID) is expected to report for 2Q.

Ciena Corp (CIEN) is expected to report $-0.12 for 2Q.

Conn's Inc (CONN) is expected to report $-0.65 for 1Q.

CorEnergy Infrastructure Trust Inc (CORRQ) is expected to report for 1Q.

DocuSign Inc (DOCU) is expected to report $0.14 for 1Q.

Drive Shack Inc (DSHK) is expected to report $-0.06 for 4Q.

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June 06, 2024 06:34 ET (10:34 GMT)

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