MARKET WRAPS
Watch For:
Weekly Jobless Claims; U.S. Fed Discount Window Borrowings; Canada Labour Force Survey for March; earnings from Constellation Brands, Lamb Weston, Levi Strauss, RPM International
Today's Headlines/Must Reads
Stocks Haven't Looked This Unattractive Since 2007
Hopes for Hong Kong's IPO Market Rest on Alibaba, JD.com Carve-Outs
Venture Funding Plunges Amid SVB Implosion
Google's Sundar Pichai Says Search to Feature Chat AI
As National Parks Visits Surge, Booz Allen Benefits
Shell Sees Output Rising, Consistent Trading Results
Saudi, Iranian Foreign Ministers Agree to Resume Flights After Beijing Meeting
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Opening Call:
Stock futures barely changed on Thursday as traders favored caution ahead of jobs data on Friday when the market will be closed.
Moves are fairly meager across asset classes as a long weekend for most major financial centers looms.
"As we approach the Easter weekend, risk-off sentiment has continued to grow in markets thanks to another round of weak data that's added to fears about a potential U.S. recession," Deutsche Bank said.
Overseas stock indexes were mixed. The Stoxx Europe 600 gained 0.4%, while in Asia, Hong Kong's Hang Seng gained 0.3% and Japan's Nikkei 225 fell 1.2%..
Stocks to Watch
AbbVie fell 2% in premarket trading after lowering fiscal-year adjusted earnings expectations to $10.62 to $11.02 a share, down from guidance the company issued in February of between $10.70 and $11.10.
Costco was down 2% in premarket trading after it said same-store sales in March fell 1.1%, down from an increase of 3.5% in February. Costco also said the average size of transactions in March fell 5.8% from February.
Lumentum said fiscal third-quarter revenue would come in under the low end of the company's prior guidance range after disclosing that a "network equipment manufacturer who represented more than 10% of our fiscal second-quarter revenue" "would not take the shipments we had originally projected for the quarter." Lumentum stock was down 9%.
SeaChange on Wednesday reported its first profit in multiple quarters. Its shares rose 21% in after-hours trading.
Economic Insight
Markets aren't pricing in further interest-rate rises by the Federal Reserve but expect around 75bps of rate cuts by the end of the year, followed by another 125bps in 2024, which is an overshooting, UniCredit Research said.
"The Fed will need to see substantial progress on core inflation moving down to 2% before it even considers rate cuts and, hence, policy rates will likely remain at their peak for longer than markets are now expecting."
As rate rise expectations decline, the 10-year Treasury yield has dropped below 3.3%, breaking out of the range of the past six months, UniCredit Research said, considering expectations of a further decline towards 3% as premature.
Read Market Expectations on ECB, Fed Peak Rates Are Stable, Says Commerzbank
Forex:
The dollar didn't fall too much following this week's ADP and ISM services data, which might indicate investors are waiting for the March job report before taking further positions in the currency, UniCredit Research said.
"The tame dollar reaction might hide the fact that investors have already started to pair positions ahead of the Easter break, but it might also indicate that markets have become accustomed to weaker data releases in the U.S.," UniCredit Research said, adding that position-paring ahead of the Easter holidays will probably continue Thursday.
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Poor investor risk appetite is limiting the euro's appreciation potential against the dollar even as interest rate differentials move in the exchange rate's favor, ING said.
EUR/USD reversed sharply from its high of 1.0970 on Wednesday despite an 11 basis points drop in short-dated U.S. yields following weaker U.S. data, ING added.
"The two-year differential between EUR and USD swap rates is moving back toward the narrowest levels seen in early March."
Wednesday's price action "tentatively confirms our thinking for EUR/USD over this next quarter," ING said.
Despite building macroeconomic negatives for the dollar, a challenging risk environment may keep EUR/USD bouncing around a 1.05-1.10 range, it said.
Energy:
Crude futures edged lower in Europe after weaker U.S. economic data looked set to halt a five-session run of gains for oil.
"Crude oil's rally paused as it battled the headwinds created by the weak economic data," ANZ said.
Despite the pause, oil is on course to end the week up 6% after a group of Saudi-led oil producers slashed production levels.
Metals:
Base metals were higher but gold dipped in early London trade, as more bullish economic data from China was counterbalanced by worries over the health of Western economies.
"The macro environment is sending mixed signals for commodity money flows," Peak Trading Research said.
Data showed China's services PMI rose to its highest level in two years but that's as "forward-looking inflation expectations have softened after U.S. job openings dropped to two-year lows, McDonald's announced layoffs, and the ADP numbers came in soft."
Friday's jobs number will affect the dollar and risk assets next week, Peak Trading added.
Iron Ore
Iron-ore prices continue to slip because of both demand concerns and policy-maker intervention, Commonwealth Bank of Australia said.
China's NDRC has led the charge this year "to crack down on misinformation, hoarding and malicious speculation that typically result in higher iron-ore prices," including this week urging companies not to exaggerate price increases, CBA said. That is a weight on prices at a time when patchy China macro data is signaling an uneven economic recovery there.
CBA tipped a fall to $100/ton by later this year, projecting a cooling in Chinese steel demand.
TODAY'S TOP HEADLINES
Shell Sees 1Q Integrated Gas Production Rising, With Higher LNG Volumes
Shell PLC on Thursday forecast improved production from its integrated gas-and-oil products division in the first quarter of 2023, with higher liquid natural gas liquefaction volumes.
The oil-and-gas company said it expects integrated gas production of between 930,000 and 970,000 barrels of oil equivalent a day, up from 917,000 in the fourth quarter of 2022. Liquid natural gas liquefaction volumes are expected to improve to 7.0 million-7.4 million from 6.8 million, on higher uptime at Prelude and QGC in Australia.
Google CEO Sundar Pichai Says Search to Feature Chat AI
Google plans to add conversational artificial-intelligence features to its flagship search engine, Chief Executive Officer Sundar Pichai said, as he steers the tech company's response to competition from chatbots such as ChatGPT and to wider business pressures.
Advances in AI would supercharge Google's ability to answer an array of search queries, Mr. Pichai said in an interview with The Wall Street Journal. He dismissed the notion that chatbots posed a threat to Google's search business, which accounts for more than half of revenue at parent Alphabet Inc.
Disney Names Joe Earley New Head of Disney+ and Hulu
Walt Disney Co. has named Joe Earley president of its direct-to-consumer unit for entertainment content, a role that gives him oversight of the Disney+ and Hulu streaming services, the company said Wednesday.
Mr. Earley is currently president of Hulu, a post he has held since January 2022 and will keep until a successor is named. Before heading Hulu, Mr. Earley was involved in the development and launch of Disney+ as head of its marketing and operations.
As National Parks Visits Surge, Booz Allen Benefits
Visitors driving into Montana's Glacier National Park this summer must buy a vehicle pass on Recreation.gov. The pass is free, but visitors pay a $2 fee to book the reservation.
Visitors might assume that, like entrance fees, the reservation charges help pay for improving trails around the park's Running Eagle Falls or expanding the park's volunteer program. But a chunk of the money ends up with consulting firm Booz Allen Hamilton Inc.
Why Is Apple's Next Earnings Report Coming So Late?
Apple has scheduled its March quarter earnings announcement for May 4, which is not exactly a huge breaking news event-except the date is unusually late, and that has investors wondering if there's a reason for the longer-than-usual delay.
In 23 of the past 25 years, Apple (ticker: AAPL) has reported March quarter results in April-April 28 in each of the two last years, and April 30 in the two years before that. The latest previous date over the last quarter century was May 2 in 2017; the 2018 announcement was on May 1.
Stocks Haven't Looked This Unattractive Since 2007
The reward for owning stocks over bonds hasn't been this slim since before the 2008 financial crisis.
The equity risk premium-the gap between the S&P 500's earnings yield and that of 10-year Treasurys-sits around 1.59 percentage points, a low not seen since October 2007.
Hopes for Hong Kong's IPO Market Rest on Alibaba, JD.com Carve-Outs
Plans by two of China's biggest technology companies to sell shares in their subsidiaries could give a jolt of confidence to a Hong Kong IPO market that has been in the doldrums for more than a year.
Chinese e-commerce giant Alibaba Group Holding Ltd., which is listed in Hong Kong and New York, said last week it would reorganize into six independently run companies and explore IPOs for them. Not long after, smaller rival JD.com Inc. filed paperwork in the Asian financial hub to sell shares in its property and industrial units, which The Wall Street Journal reported were aiming to raise about $1 billion each this year.
China Caixin Services PMI Rises to Highest in Over Two Years
A private gauge of China's service sector activity rose to its highest level in 28 months in March, signaling a continued recovery after Beijing eased Covid-19 restrictions.
(MORE TO FOLLOW) Dow Jones Newswires
04-06-23 0605ET
