MARKET WRAPS
European stocks were losing ground Friday and were set to follow Asian markets in ending the week on a low note, as fresh hostilities between the U.S. and Iran frayed investor sentiment.
European sectors exposed to consumer confidence and higher energy inflation, including banks, industrials and travel and leisure stocks, fell in initial trading.
Approaching midday the FTSE 100, the CAC 40 and the DAX were in negative territory. The pan-European Stoxx 600 index was down.
The moves come after the U.S. and Iran exchanged fire on Thursday in the Persian Gulf sending oil futures higher. President Trump called the tit-for-tat trade a "trifle" and reiterated that the cease-fire is still in place.
"Our view remains that we are moving towards a deal, but some near term escalation cannot be ruled out as Trump tries to gain an upper hand in negotiation," Jefferies said.
Meanwhile, a federal trade court ruled Thursday that Trump didn't have the authority to impose new global tariffs after his previous levies were struck down by the U.S. Supreme Court in February.
The Court of International Trade decision invalidated Trump's attempt to impose a 10% tariff on goods from virtually every nation by invoking Section 122 of the Trade Act.
Despite this latest tariff setback, Trump took to social media to say he decided to give the European Union until July 4 to implement its trade deal with the U.S., or else face "much higher" tariff levels.
Trump had previously threatened to raise tariffs on European autos to 25% from 15%.
The European Parliament's top trade negotiator said Thursday that the EU was keen to press ahead with trade negotiations with the U.S. this month.
Elsewhere, German industrial production retreated in March, falling 0.7% as the conflict in the Middle East sent energy prices surging.
U.S. Markets:
Stock futures pointed to a higher open Friday after stocks ended lower in the prior session. Investor focus will likely be on April employment data for insight into the health of the U.S. labor market.
Forex:
The euro was little moved by President Trump's fresh tariff threats against the European Union, ING said, adding that it thinks the euro will rise above $1.18 on any U.S.-Iran peace deal but expects a fall below $1.17 if negotiations collapse.
The dollar rose against a basket of currencies as reports of fresh exchanges in the Iran war lifted oil prices. Investors are also looking ahead to the key U.S. nonfarm payrolls report at 1230 GMT.
Sterling showed little reaction to the ruling U.K. Labour Party's early losses in local elections so far, but it remains vulnerable to political risks, ING said.
Bitcoin fell below the key $80,000 level as renewed conflict between the U.S. and Iran dampened risk appetite.
Bonds:
Eurozone government bond yields opened higher, reacting to a renewed increase in oil prices. Fresh escalations in the Middle East mean a bumpy peace process, causing oil prices to rise and in turn lift eurozone bond yields.
The prospect of a permanent cease-fire in the Middle East and the reopening of the Strait of Hormuz have, unsurprisingly, led to a tightening in eurozone government bond yield spreads, Societe Generale said.
"Should an agreement be reached, spreads could retest their March lows leaving carry trades in the belly [intermediate segment of the yield curve] attractive again."
Treasury yields declined in Asian trade with market focus on the release of April payrolls data later in the day.
"A modest gain in payrolls alongside an unemployment rate holding at 4.3% would reinforce the picture of a labor market that's cooling but not cracking--a low-hire, low-fire equilibrium," First Citizens Bank said.
Investors could put a risk premium on gilts if the local election results show a heavy defeat for the ruling Labour party, Tickmill Group said.
"For markets, the key question is whether the election result increases fiscal risk."
Oil remains the dominant factor for eurozone bond market
valuations, where the correlations between Brent and inflation forwards are strikingly high, Commerzbank said.
"If a peace deal is signed in June, a 'look-through' approach could still be adopted, while the market seems to be leaning towards [European Central Bank President Christine] Lagarde's 'second broad case.'"
Energy:
Oil prices trimmed earlier gains but remained elevated after the U.S. and Iran exchanged fire, threatening an already-fragile truce and casting doubt on peace negotiations.
"Brent crude trades firmer, holding above $100 after another volatile week that saw an almost $20 trading range as Middle East headlines swung sentiment between optimism and frustration. The key point remains unchanged: the Strait of Hormuz remains effectively closed, with renewed clashes between U.S. and Iranian forces lowering the prospect of a near-term reopening," Saxo Bank said. "
Metals:
Gold prices traded above $4,700 a troy ounce, supported by central-bank buying and as investors monitored Middle East developments.
"Gold's resilience during a period of exceptional equity-market strength points to continued central-bank demand, as well as lingering investor unease over inflation, economic growth and mounting fiscal debt concerns, " Saxo Bank added.
EMEA HEADLINES
Commerzbank to Cut 3,000 Jobs, Spend on AI as it Raises Targets Amid UniCredit Bid
Commerzbank said it would cut around 3,000 roles, raised financial targets and outlined its strategy for the coming years amid a takeover bid from UniCredit.
The German lender said it would raise its expectations for 2028, and set new targets in a plan for 2030. It aims to further integrate artificial intelligence into its planning, following a strategy from aspiring acquirer UniCredit to revamp the bank.
Lonza Says Big Pharma Might Delay Outsourcing Decisions Amid U.S. Investments
Swiss contract drug manufacturer Lonza Group said big pharmaceutical companies might take longer to make outsourcing decisions amid plans for big investments in the U.S., as it reiterated its full-year outlook.
The company said Friday that it delivered a strong first-quarter performance in line with its expectations for the full year of stronger sales growth and profitability in the first half than in the second. It doesn't anticipate material impact from the conflict in the Middle East or from U.S. trade and tariff policies.
Advertising's First Female CEO Isn't Afraid to Fail
For five days every June, ad agencies try to out-splash one another in a rosé-fueled competition to woo advertisers at the Cannes Lions ad festival.
WPP spent $23 million last year on the French Riviera. The ad giant ferried clients and potential clients by private speedboats to the secluded Saint-Honorat Island, where they enjoyed an al fresco paella and zucchini-flower lunch.
U.K. Shop Visits Dip as Inflation Bites into Spending
Retail footfall in the U.K. saw a double-digit percentage decline in April as stubborn inflation stifled spending, according to a prominent industry group.
Visits to retail shops dropped 10.7% on year in April, the weakest performance in more than five years, according to a report from the British Retail Consortium.
GLOBAL NEWS
IMF Warns That Evolving AI Threat Could Upend Financial Markets
Advances in artificial-intelligence can strengthen markets' defense against cyber threats but the technology now has the capacity to cause a macro-financial shock too, the IMF warns.
The International Monetary Fund's analysis suggests that extreme losses caused by a cyber incident could trigger funding strains, raise solvency concerns and disrupt broader markets.
AI Is Distorting Practically Everything About the Economy
Until recently, artificial intelligence was a welcome tailwind for U.S. growth.
We're beyond that now. AI is more like a hurricane-strength weather system making itself felt across the entire economy. It is distorting the stock market, profits, the speed and composition of economic growth, trade and even our moods-especially about the job market.
Tech Stocks Face a New AI Hurdle: A Widespread Components Shortage
As more earnings reports roll out, one trend has become increasingly clear: the surge in artificial intelligence demand is leading to supply shortages, and that's affecting tech companies across the board.
Earnings season has given investors a lot to digest, including just how strong demand for AI truly is. Hyperscalers like Microsoft and Alphabet raised their capital expenditure expectations as they spend hundreds of billions of dollars to build out the infrastructure needed to power AI. Chip makers Advanced Micro Devices and Intel both recently reported knockout financial results as customers buy up CPUs, or chips that can power inference, the process of running models.
Inside 'Project Freedom,' Trump's Aborted Bid to Reopen the Persian Gulf
The Alliance Fairfax, a towering black and white car-carrier ship that had been stranded in the Persian Gulf for over two months, was finally making a break for it.
"You are all set to go," a U.S. military officer radioed as the ship glided through the Strait of Hormuz on Monday and swung around the peninsula at the northern end of Oman. "Safe travels."
How Anthropic's Mythos Threw the White House AI Strategy Into Chaos
WASHINGTON-On a recent call with the heads of the biggest artificial-intelligence companies, Vice President JD Vance was alarmed.
New AI models such as Anthropic's Mythos, which are capable of finding software vulnerabilities on their own, threatened to disrupt small-town banks, hospitals and water plants by starting cyberattacks that local governments weren't equipped to handle, Vance said.
Gulf States Lift Restrictions That Blocked 'Project Freedom' in Strait of Hormuz
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05-08-26 0503ET
