MARKET WRAPS
Stocks:
European stocks pushed higher on Friday as investors cheered some upbeat earnings, while shares in London got a modest lift from data that showed the risk of a near-term recession in the U.K. had eased.
Economic Insight
With no clear disinflationary trend, the market pricing of interest-rate cuts by the Federal Reserve and the European Central Bank is premature, Societe Generale said.
"Should investors fade the pricing of cuts? we think so."
As the labor market is tight and inflation is sticky, central banks are likely to keep policy restrictive until inflation moderates, SocGen said.
U.S. Markets:
Stock futures gained ground as investors pondered whether U.S.-China tensions could be easing following talks between senior officials this week.
National security adviser Jake Sullivan met with his Chinese counterpart on Wednesday and Thursday as Washington and Beijing try to stop relations from further deteriorating.
"From the market standpoint, that does help alleviate some pressure," Pictet Asset Management said. "We think this meeting is an effort to diffuse some of those tensions."
Coming up: The University of Michigan's consumer-sentiment index is due--a key indicator used to gauge whether the recent banking-sector stress is affecting spending habits.
Stocks on the Move
PacWest and other regional banks were bouncing back in premarket trading. But the lenders still can't seem to shake off turmoil that has dogged them since Silicon Valley Bank collapsed in March.
PacWest rose 4%, Western Alliance was up 3%, and Zions Bancorp advanced 1.8%.
Other Movers
Tesla shares rose 1% premarket after Elon Musk said he had found a new chief executive for Twitter, potentially freeing up time for Musk to focus on the EV maker.
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Forex:
The dollar was slightly lower against a basket of currencies after rising in the previous session, with ING saying markets are set to remain "very sensitive" to U.S. debt ceiling news into the weekend.
"We still think investors are worryingly eyeing a scenario where it would ultimately take an adverse market reaction to break the impasse, and lack of any progress towards a deal can definitely continue to offer some support to the dollar."
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Sterling looks vulnerable as the Bank of England's 25 basis points interest-rate rise on Thursday was likely the last of the cycle, ING said.
"While we don't exclude one final June hike, our base case is that we have reached the peak of the BOE tightening cycle as inflation will start to rapidly decelerate this year," ING said.
However, the Sonia curve prices in around 38 basis points of further rate rises, leaving the pound at risk of falling. This may materialize in EUR/GBP, which could rise to 0.9000 in the second half of 2023 as EUR and GBP rates re-converge, ING said
Bonds:
Commerzbank remains cautious on Italian government bonds ahead of reviews by Fitch later on Friday and by Moody's on May 19, looking for the 10-year BTP-Bund spread to trade back above 200 basis points.
"While the stable outlook of the BBB-rating appears to be at risk, not least after Fitch's negative rating action on France a couple of weeks ago, it seems more likely that Fitch skips the Italian review this week, " Commerzbank said.
"More relevant in any case will be Moody's review next week, where any negative rating action would lead to a junk rating."
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Given the slow pace of decline in core inflation in the eurozone, it is premature to position for lower long rates, SEB said, which expects the German 10-year Bund yield to trade in a broad range around 2.40% in the coming months.
"As core inflation likely turns lower only after the summer, we believe European Central Bank expectations [of the market] are unlikely to push long rates to a downward trend anytime soon."
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Societe Generale said Spain is a defensive play in the government-bond universe. "Spanish government bonds are relatively cheap vs. peers and can be a defensive play if risk aversion rises."
SocGen likes five-year Spanish bonds versus Italian BTPs into upcoming Italian rating decisions and recommends a five to 10-year Spanish bond steepener versus Bund before a new 10-year Spanish bond comes to the market.
Read It Might Be Early to Bank on 10-Year Gilt-Bund Spread Tightening
Energy:
Oil prices are on course for a fourth weekly drop, weighed by economic jitters and signs of increased supplies.
Reports that a pipeline linking northern Iraq and Turkey would resume flows on Saturday--after being shuttered for over a month because of a legal dispute--pushed prices lower on Friday. The reopening could see around 450,000 barrels of oil a day return to the market, according to ING.
Meanwhile, economic worries have hung over oil this week. "Most of the commodities complex came under pressure due to lingering banking concerns, worries over the U.S. debt ceiling and questions growing over how strong a Chinese recovery we are seeing," ING added.
Metals::
Base metals prices were mixed as worries over the global economy and weak growth continue to hit demand.
Prices have been falling steadily this year after a rebound in buying from China post-lockdown failed to materialize, according to Fitch subsidiary BMI.
"The global outlook for metals demand remains downcast in 2023 with weak-to-flat growth expected across major economies, pressuring prices," it said.
BMI expects that global real GDP growth will slow to 2.1% on year in 2023 from 3.1% on year in 2022
DOW JONES NEWSPLUS
EMEA HEADLINES
UK Economy Ekes Out Growth in 1Q
The U.K. economy grew slightly in the first quarter, upturning expectations a few months ago of a prolonged recession, though high inflation curbing purchasing power and Bank of England rate rises could put a lid on economic progress in the months to come.
Gross domestic product grew 0.1% from January to March compared with the previous three-month period, the same as in the fourth quarter of 2022, according to data from the Office for National Statistics released Friday.
Societe Generale Sees 1Q Revenue Fall, Profit Rise
Societe Generale's 1Q Profit Exceeds Views, But French Revenue Weighs
0752 GMT - Societe Generale's first-quarter exceeded expectations on quarterly net profit, helped by strong ALD Automotive and Fixed Income, Commodities and Currencies revenue, low costs and provisions, Jefferies analysts Flora Bocahut and Theo Massing say in a research note. The French bank reported 1Q net profit of EUR868 million compared with consensus expectations of EUR300 million, but the bank's French retail business posted a gloomy result, the analysts say. French retail revenue missed expectations by 9% in the quarter, and is down 9.5% compared with the prior year with an 18% on-year decline to net interest income. "We think [2023] forecasts are likely to decline on the back of the revised French retail revenue expectations," the analysts say. (pierre.bertrand@wsj.com)
Allianz Confirms 2023 Guidance After 1Q Net Profit Jumped
Allianz said Friday that first-quarter net profit rose sharply after its year-earlier result was hit by a provision, and confirmed its guidance for 2023.
Europe's largest insurer said it made a net profit of 2.03 billion euros ($2.22 billion) compared with EUR417 million in the year-earlier period, when it booked a provision after reaching settlements related to its Structured Alpha funds in the U.S.
Richemont Upbeat for New Fiscal Year as China Reopening Spurs 4Q Sales
Compagnie Financiere Richemont said Friday that it expects further strong demand ahead, after booking rising sales and profitability for fiscal 2023.
The Swiss luxury group booked sales of 19.95 billion euros ($21.78 billion) in the year to March 31, 14% higher at constant currency than the year before. Analysts had expected sales of EUR19.56 billion, according to a poll of analysts' forecasts compiled by FactSet.
AngloGold Ashanti to Move Primary Listing to US; Backs 2023 Guidance
AngloGold Ashanti said Friday that it intends to move its primary listing to New York alongside a corporate restructuring, and backed its full-year guidance.
The South African gold miner said it has undertaken a comprehensive review of its domicile and listing structure and concluded the most appropriate structure is a U.K. corporate domicile, with a U.S. primary listing and second listings in South Africa and Ghana. It also expects to delist from the Australian stock exchange on June 27.
GSK Sells Haleon Shares at 335p Each, Raising GBP804M
GSK said Friday that it has now sold 240 million shares in consumer healthcare business Haleon for 335 pence each, raising 804 million pounds ($1.01 billion), as first announced late Thursday.
The pharmaceutical giant said Thursday night that it was selling the shares via an accelerated bookbuild. The sale price is a 2.3% discount to Haleon's closing price of 342.85 pence on Thursday.
Royal Philips to Pay $62 Million to Settle China Bribery Probe
Royal Philips, a Dutch medical supply company, has agreed to pay $62 million to resolve claims by regulators that it violated a U.S. antibribery law by improperly manipulating Chinese procurement processes and influencing public officials at Chinese state-run hospitals.
The Amsterdam-based company's conduct in China violated the Foreign Corrupt Practices Act, the U.S. Securities and Exchange Commission said Thursday. The regulator said Philips had agreed to settle its claims without admitting to or denying the findings from its investigation.
Zelensky Urges Caution on Timing of Counteroffensive as Ukraine Advances in Bakhmut
Ukraine made further gains against Russian forces in the eastern city of Bakhmut on Thursday, as President Volodymyr Zelensky said the military needs more time before it can launch a much-anticipated major counteroffensive to recapture territory it has lost.
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05-12-23 0557ET
