MARKET WRAPS
Stocks:
European stocks struggled for momentum on Thursday despite a more optimistic mood globally following the softer U.S. inflation data renewing hopes of the Federal Reserve cutting interest rates soon.
After the inflation report, markets' pricing of Federal Reserve interest rates "seems about where it 'should' be, ahead of the June FOMC in a little under a month's time," Pepperstone said.
Meanwhile, the latest European Commission forecasts provide a gloomy fiscal picture, with expectations of a higher deficit for the eurozone, including for major countries like France and Italy, HSBC said.
Combined with rising borrowing costs, this means debt-to-GDP ratios are also likely to keep rising, it said.
Shares on the Move
Siemens agreed to sell its Innomotics large motors business for the equivalent of $3.8 billion. Its shares fell more than 4%.
Stocks to Watch
Spanish and Italian lenders are still the place to be for bank investors, Keefe, Bruyette & Woods said, confirming BBVA and UniCredit as its top picks.
U.S. Markets:
Stock futures traded higher, a day after the three major stock market indexes closed at record highs following data that showed an easing of inflation.
Walmart, JD.com and Deere are due to post earnings. Economic data include housing starts, industrial production and weekly jobless claims.
Stocks to Watch
AST SpaceMobile jumped 38% after the company reached a deal to provide satellite broadband to AT&T cell phones. AST SpaceMobile said the agreement extends until 2030.
Chubb was rising 11% after it was revealed as Berkshire Hathaway's mystery stock purchase. Warren Buffett's Berkshire disclosed in a filing that it held 25.9 million shares of the big property and casualty insurer at the end of the first quarter.
Forex:
EUR/USD has rallied around 1% this week thanks to the dollar's drop and the 1.0900 should not be a very strong resistance if U.S. data, for example jobless claims later in the day, adds pressure on the dollar, ING said.
"However, a move to the 1.1000 benchmark levels seems premature given the still sticky inflation picture in the U.S."
ING is less concerned with the ECB generating much pressure on the euro leg, with a June rate cut being fully priced.
UOB Global Economics & Markets Research said EUR/USD may extend its recent uptrend, based on the weekly chart.
The currency pair surged above trendline resistance at 1.0855 earlier this week, which augurs well for further EUR/USD strength, it said.
EUR/USD's upward momentum is starting to build, with the weekly moving average convergence divergence indicator is heading into positive territory. On the upside, levels to watch are 1.0980-March's high-and 1.1020, the trendline connecting the highs of July 2023 and December 2023, UOB said.
The U.S. exceptionalism narrative continued to show signs of softening, giving markets the perfect excuse to boost Fed rate-cut views and sell USD, OCBC said.
U.S. retail sales and CPI data showed that economic activity and prices weren't reaccelerating, offering much-needed comfort for risk proxies, it said.
Still, USD's carry advantage may limit declines, with further weakness likely needing more soft data. DXY was last at 104.20, with bearish momentum on the daily chart intact.
OCBC pegs key support at 104. A clean break below could clear a path to 103.20. If 104 holds up, DXY could revert to range trading until the next dataset, OCBC said. It put resistance at 104.80 and 105.50.
Bonds:
Markets are currently pricing 51 basis points of interest-rate cuts by the Fed this year, with the September cut almost fully priced in, leaving limited room for rally in government bonds, Jefferies said.
"We are in the two rate-cut camp for the Fed, starting in September, and do not see much scope of a rally from current levels."
Hence, Jefferies said it would recommend investors tactically exit any bullish positions in front end [short-dated] Treasurys or Bunds.
Commerzbank Research said rates markets looked set to enter calmer waters after U.S. inflation and retail sales data caused the latest leg higher [in prices].
German Bunds should continue to be bought as ECB speeches and upcoming data look set to be supportive, it said.
Energy:
Oil prices rose, buoyed by shrinking stockpiles and a wider risk-on mood following the easing U.S. inflation data, offering scope for looser Federal Reserve monetary policy and tugging the dollar lower, MUFG said.
Effective OPEC+ market management should ensure Brent remains in the $80-$100 a barrel range in 2024, with the base case seeing the group leveraging its inelastic pricing power and the ceiling from ample spare capacity to handle tightening shocks, MUFG said.
Metals:
Gold futures were broadly flat, consolidating gains made following the U.S. inflation report.
MUFG said the precious metal is its most bullish commodity call for 2024, on a trifecta of eventual Fed rate cuts, supportive central bank demand and bullion's role as the geopolitical hedge of last resort.
EMEA HEADLINES
Roche Shares Climb After Weight-Loss Drug Shows Efficacy in Early-Stage Trial
Roche Holding said its weight-loss drug candidate achieved positive results in an early-stage trial, giving the Swiss pharmaceutical giant a boost in its bid to catch up to Novo Nordisk and Eli Lilly in the class of medicines that has shaken up everything from pharma to snack companies.
The Swiss drug giant joined the race for drugs to treat obesity and diabetes through its $3-billion-plus purchase of Carmot Therapeutics. Roche announced that deal late last year as a step toward capturing a slice of the booming weight-loss drug market, alongside competitors such as Wegovy- and Ozempic-maker Novo Nordisk and Eli Lilly, which makes Mounjaro and Zepbound.
Deutsche Telekom Backs Guidance After Revenue Rises on Strong Growth in Core Markets
Deutsche Telekom backed its full-year guidance after delivering higher revenue in first quarter, boosted by strong growth in its core markets.
The German telecommunications said Thursday that adjusted earnings before interest, taxes, depreciation and amortization after leases-a closely watched profitability metric-for the first three months rose to 10.47 billion euros ($11.40 billion) from EUR9.96 billion for the same period a year earlier. This beat a compiled analysts' forecast of EUR10.25 billion taken from the company's website.
easyJet Expects Summer Demand to Boost Earnings After Net Loss Narrowed
EasyJet expects summer demand to boost fiscal-year earnings as the company posted a narrowed first-half loss.
The London-listed low-cost airline said summer demand continued to be positive and that it had booked 1 million more customers than a year prior as it expected its second-half number of seats on sale to grow 8% on year.
GLOBAL NEWS
America Is Still Headed for a Soft Landing
Is Goldilocks back already? Certainly the bears are nowhere to be seen.
The cozy consensus that was prevalent late last year of a just-right pairing of slowing inflation and solid growth was upended by stubbornly high inflation readings for the first few months of 2024. So investors breathed a sigh of relief on Wednesday when April's consumer-price index came in a tad below expectations.
The GameStop Mania Is Back. Is Wall Street Ready This Time?
Meme stocks are back. Is Wall Street ready?
The sudden revival of GameStop mania this week comes just as the U.S. financial industry is racing to fix a big problem with the market's plumbing that roiled investors during the original meme-stock craze in 2021.
Surging Hospital Prices Are Helping Keep Inflation High
One reason U.S. inflation is still high: Increases in prices for procedures to prop open clogged arteries, provide intensive care for newborns and biopsy breasts.
Hospitals didn't raise prices as early in the pandemic as supermarkets, retailers and restaurants. But they have been making up ground since then. Their increases have contributed to stubbornly high inflation readings from the consumer-price index, which in April increased 3.4% from a year ago.
Israeli Friendly Fire Kills Five Troops in Gaza Amid Mounting Divisions Over War
TEL AVIV-The Israeli military said Thursday that five of its soldiers were killed when an Israeli tank fired at a building in Gaza that was being used by its own troops, raising the war's toll on Israel amid pressure from hostage families and allies to end the fighting.
At least seven other soldiers were injured in the incident, which took place in the Jabalia refugee camp in northern Gaza on Wednesday evening, the military said. An Israeli tank fired two shells at the building after mistaking a group of Israeli paratroopers located inside for militants. Three of the wounded soldiers sustained serious injuries, said the military, adding that it is investigating the incident.
Struggling in the Sunbelt and the West, Biden Tries to Fortify Blue Wall
WASHINGTON-President Biden's advisers view the "Blue Wall" states of Michigan, Pennsylvania and Wisconsin as his most likely path to re-election, leading them to devote extensive time and resources there as the prospects of winning other battlegrounds appear more daunting.
The Biden campaign and other Democrats believe they have several options to get the 270 Electoral College votes needed to win another four years in office. But retaining Michigan, Pennsylvania and Wisconsin, as well as Nebraska's second congressional district, would clear the threshold no matter what happens in the sunbelt states of Georgia and North Carolina and the Western states of Arizona and Nevada-where polling shows Donald Trump, the presumptive GOP nominee, in a much stronger position. (Nebraska and Maine apportion some of their delegates by congressional district.)
Slovak Officials Suspect Political Motivation for Prime Minister's Shooting
(MORE TO FOLLOW) Dow Jones Newswires
05-16-24 0639ET
