MARKET WRAPS
Stocks:
European stocks were broadly weaker on Friday as concerns mounted about the prospect of further rate rises and the potential damage to the economy, while data showed that business activity in the eurozone weakened in June.
The HCOB Flash Eurozone Composite PMI Output Index-which gauges activity in the manufacturing and services sectors-fell to a five-month low of 50.3, below economists' expectations.
"The downward trend in the composite PMI points to a difficult second half of the year as companies across all sectors face deteriorating order books," Hamburg Commercial Bank said.
Stocks to Watch
The profit warning by Travis Perkins last week has led Jefferies to cut its Ebita forecast by 10%-15% a year, largely driven by the core merchanting division's difficulties.
The company's weaker-than-expected demand is now likely to spark debate around its ability to hold pricing, and therefore margins, in this environment.
"Although the stock looks inexpensive after these cuts, we expect investors to remain nervous about implications of a weak demand backdrop in a competitive market for price and margin," Jefferies said.
It retained its hold rating on the stock but cut its price target to 896.0 pence from 1,060.0 pence.
U.S. Markets: Markets:
Stock futures pointed to a weaker start for Wall Street as investors worried that higher interest rates could lead global economies into a recession.
Elsewhere, Treasury prices rose. That pulled the yield on benchmark 10-year notes down to 3.740%, from 3.797% on Thursday.
Up ahead, U.S. purchasing managers' indexes will show whether the services sector has joined manufacturing in contracting.
Stocks to Watch
3M rose 3.5% after the company said it would settle claims over so-called forever chemicals in drinking water with public water providers across the country. The agreement has a value of $10.3 billion and will be payable over 13 years. 3M said it would record a charge for that amount in the second quarter.
Smith & Wesson gained 8.4% in premarket trading after it reported fiscal fourth-quarter earnings and sales that beat expectations and raised its quarterly dividend by 20%.
Virgin Galactic shares fell more than 18% after the company said it would raise up to $400 million through the sale of common shares.
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Forex:
The euro fell to a one-week low against the dollar after the weaker-than-expected PMI surveys.
Meantime, the dollar strengthened broadly after Jerome Powell said interest rates were likely to rise further, noting that inflation and economic activity haven't slowed this year as much as many officials had anticipated.
Thursday's U.S. existing home sales data came in better than expected, "adding to the optimism that the U.S. real estate market could be doing better after months of negative pressure," Swissquote said.
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Sterling's failure to hold initial gains after the Bank of England's larger-than-expected interest rate rise suggests a lack of market confidence in the bank's ability to complete is mandate of price stability, Ebury said.
The near unanimity among BOE policymakers to raise rates by 50bps, marks another "embarrassing admission" that the bank continues to "grossly underestimate the extent of the inflation overshoot, and the degree of tightening required in order to anchor inflation expectations," Ebury said.
There's a growing consensus that the BOE remains behind the curve and needs to act aggressively to rectify the situation, it added.
Bonds:
Commerzbank Research said Italian government bonds have been more resilient than expected, defying headwinds from monetary tightening and supported by low volatility and risk-on sentiment.
With the 10-year BTP-Bund yield not far above 150 basis points, however, Commerzbank Research sees limited value while the European Central Bank's balance sheet run-down accelerates and the macro-economic and political environment could get more challenging.
" We now expect this spreads in a range of 150-200bp during the second half of the year ," it said.
Read Spanish Bonds Expected to Outperform Post-Elections
Energy:
Crude futures fell for a second day as higher interest rates threaten to weigh on demand.
Bigger-than-expected rate hikes in the U.K. and Norway have added to hawkish comments from Powell. Higher rates increase the cost of holding oil and are pushing producers to sell off their stocks, ANZ said.
Coupled with this, easing inflation is reducing investors' appetite for commodities, which typically are seen as an inflation hedge, ANZ added.
Metals:
Base metals were weaker with gold flat, as a hawkish outlook from the Fed continued to boost haven assets like the dollar and bonds.
"The prospect of two further rate hikes pushed Treasuries lower while the dollar gained, hurting investor demand for the [gold]," ANZ Research said, adding that the market is now pricing in a recession, something which should boost gold demand.
DOW JONES NEWSPLUS
EMEA HEADLINES
Eurozone Economy Loses Momentum in June, PMIs Suggest
Business activity in the eurozone weakened in June and though it still eked out growth for a sixth straight month, the loss of momentum points to a struggling economy, data from a purchasing managers' survey showed Friday.
The HCOB Flash Eurozone Composite PMI Output Index-which gauges activity in the manufacturing and services sectors-fell to a five-month low of 50.3 in June, from a downwardly revised 52.8 in May.
Siemens Energy Shares Plummet After Withdrawing Fiscal 2023 Profit Guidance
Siemens Energy shares plummeted Friday in early trading after the German energy company withdrew its fiscal 2023 profit guidance following a technical review of Siemens Gamesa's installed fleet and product designs.
At 0738 GMT shares traded 31% down to EUR16.01.
Eni, Var Energi to Buy Neptune Energy's Global and Norwegian Businesses
Eni and Var Energi will acquire Neptune Energy Group's global and Norway businesses for around $4.9 billion, including debt, Eni said Friday.
Eni, an Italian energy company, said it will buy the London-based oil and gas company's entire portfolio, minus its German and Norway businesses, for $2.6 billion including debt. Oslo-based Var Energi will acquire Neptune's Norway operations for around $2.3 billion, including debt, in a separate deal. Eni owns 63% of Var.
Thyssenkrupp, Industrie De Nora Set Price Range for Thyssenkrupp Nucera IPO
Thyssenkrupp and Industrie de Nora on Friday set the price range for the initial public offering of Thyssenkrupp Nucera, with its first day of trading on the Frankfurt Stock Exchange planned for July 7.
Thyssenkrupp Nucera, the electrolyzer business of the German industrial conglomerate, said it has an IPO price range of between 19 euros and 21.50 euros a share ($20.82-$23.55), implying a total market capitalization of between EUR2.4 billion and EUR2.7 billion.
UK Retail Sales Unexpectedly Ticked Up in May
U.K. retail sales rose unexpectedly in May, helped by warm weather that boosted online trading, though the squeeze on food spending caused by high inflation persisted.
Retail-sales volumes ticked up 0.3% on month, lower than the rise of 0.5% in April, data from the Office for National Statistics showed Friday. The reading was, however, stronger than expectations of a 0.2% fall from economists polled by The Wall Street Journal.
UK Consumer Confidence Rose in June Despite Cost-of-Living Pressures
Confidence among U.K. consumers improved for the fifth month in a row in June, with Britons feeling more confident about their future financial situation, despite being squeezed on the cost of living via stubbornly high inflation and climbing interest rates.
Research firm GfK said its consumer-confidence barometer stood at minus 24 in June, compared with minus 27 a month earlier, higher than expectations from economists polled by The Wall Street Journal, also at minus 27.
GSK Reaches Confidential Settlement Over Zantac Litigation
GSK said Friday it reached a confidential settlement with plaintiff James Goetz regarding the legal action concerning heartburn treatment Zantac and accusations that it causes cancer, and that the case, which was filed in a California state court, will be dismissed.
The London-listed pharmaceutical giant said it didn't admit any liability in the settlement and that it would continue to defend itself based "on the facts and the science in all other Zantac cases."
Steinhoff International Swung to 1H Pretax Profit on Gains From Investments, Disposals
Steinhoff International Holdings on Friday said it swung to pretax profit for the first half of fiscal 2023 from gains on its investments and disposals.
The South Africa-based conglomerate posted 2.04 billion euros ($2.24 billion) in pretax profit for the six months ended March 31, from a pretax loss of EUR237 million for the same period the previous year, which was hit by heavier costs.
GLOBAL NEWS
Where's the Recession We Were Promised?
The 2023 recession is missing in action. At the end of last year, economists were more convinced than they've ever been that recession was on the way, but it refused to arrive. Now investors, economists and Federal Reserve policy makers are giving up on the idea, expecting the economy to be (a bit) stronger and stock prices and bond yields to be higher.
Why aren't we in recession? Is it still on the way? And could it be that the recession forecasts perversely helped us avoid recession?
DOJ Officials Slowed, Blocked Hunter Biden Tax-Crime Charges, IRS Agent Alleges
WASHINGTON-House Republicans on Thursday released transcripts of interviews in which Internal Revenue Service employees alleged that the Justice Department hindered the criminal investigation into the president's son, Hunter Biden, just days after a plea agreement was announced in his case.
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06-23-23 0552ET
