Yesterday, new data showed signs of slowing activity in America. New unemployment claims rose to 245,000 in the week ended April 15 from 240,000 claims in the previous week, which is higher than estimates. The Philadelphia Fed Manufacturing index came in at-31.3 in April, while -19.2 was expected in the Bloomberg consensus. The Fed's "Beige Book" revealed that officials have little growth expectations.
 
Today, PMI data showed the EU’s biggest economies Germany and France recovered, thanks to services. China is also recovering after the end of Covid restrictions.
 
This confusing data is weighing on global indices, which are struggling for direction.  Yesterday, my column was about volatility disappearing, and although equity markets have become more nervous, they continue to move within narrow limits. The S&P500 ended the session 0.6% lower and the Nasdaq 100 down 0.7%.
 
Lower oil prices are weighing on energy, while financial and real estate stocks have suffered from the return of fears about regional banks, whose results are not great. In addition, there were some major setbacks. Telecoms operator AT&T fell by 10% after announcing disappointing results. Tesla also fell by 10% after the market took a swipe at it for clearly choosing volume over margins. The price war launched by the Californian group weighed on the entire sector yesterday, with heavy losses in Europe and the United States.
 
The overall picture is more or less unchanged as we await next week's results from a number of major companies, from Airbus to Verizon, including Nestlé, Coca-Cola, Alphabet, Microsoft, Roche and Amazon. Investors expect the Fed to raise rates by a quarter point on May 3 and then pause. If the economic situation in the US deteriorates too dangerously, they even hope that the central bank will reverse course in the coming months.
 
Today, the focus will be on the PMI indicators for industry and services in the US. They take the pulse of the optimism or pessimism of corporate purchasing managers and are therefore a good marker of economic activity. The March batch showed a continued contraction in industry, while services remained robust. Poor US figures could reinforce the market's belief in a shift in Fed monetary policy... while increasing fears of recession. It is hard to say which of the two approaches will prevail over the other. That said, there could also be some pleasant surprises, which would add to the confusion.
 
On the earnings calendar today, we have Procter & Gamble, Schlumberger and Freeport-McMoRan, among others. On the geopolitical front, defense ministers and senior military officials from several countries are meeting this morning in Ramstein, Germany, to discuss continued support for Ukraine in the war against Russia. The Ukrainian president yesterday called on his allies to allow him to begin the process of joining NATO. Meanwhile, the Wall Street Journal reveals that pro-Russian hackers have attacked Eurocontrol, the European air traffic control system. In Washington, rumors are circulating about new measures by the Biden administration to limit US investment in China.
 
Today is the third Friday of the month, which is the clearing session on markets known as the "three witches". The expiry of several option classes creates moments of volatility during the session.

 

Economic highlights of the day:

Today, we have leading PMI activity indices for all the major economies. The full agenda is here. 

The dollar is flat against the euro at EUR 0.9115 and up 0.4% against the pound to GBP 0.8074. Gold is down to USD 1985. Oil is stabilizing, with North Sea Brent at USD 80.97 a barrel and US WTI light crude at USD 77.50. The yield on US 10-year debt falls to 3.53%. Bitcoin is trading at USD 28,000.

 

In corporate news:

  • Tesla reported a lower-than-expected first-quarter gross margin on Wednesday, in the wake of a campaign of vehicle price cuts designed to stoke demand in a slowing economy and fend off growing competition. The stock was down 7.7% in pre-market trading.
  • International Business Machines (IBM) beat Wall Street expectations for first-quarter profit and reported better-than-expected demand for IT services, sending its stock up 1.8% before the open.
  • AT&T fell nearly 4% in premarket trading after reporting lower-than-expected quarterly revenue on Thursday amid intensifying competition.
  • Blackstone on Thursday reported a 36% decline in first-quarter distributable earnings per share amid a slowdown in the housing market. 
  • American Express was down 1.2 percent in pre-market trading after reporting first-quarter earnings per share of $2.40, compared with $2.66 expected.
  • Philip Morris International - Marlboro Cigarette maker cut its full-year profit forecast on Thursday, citing higher tobacco leaf prices, energy and labour costs, which weighed on the stock, which was down 2 percent in premarket trading.
  • Alcoa was down 3.7% in premarket trading after reporting a larger-than-expected net loss and lower-than-expected sales for the first quarter.
  • Las Vegas Sands - The casino and hotel operator reported better-than-expected quarterly revenue, benefiting from increased attendance levels in Singapore and Macau.
  • Bed Bath & Beyond fell 14.4% in premarket trading as the Wall Street Journal reported that the home goods retailer was preparing to file for bankruptcy this weekend.

 

Analyst recommendations:

  • Cedar Fair: Morgan Stanley initiated coverage with a recommendation of overweight. PT up 27% to $53.
  • Fifth Third Bancorp: Wedbush raises the price target to $33 from $32, maintains Outperform rating
  • IMI: HSBC upgrades from hold to buy targeting GBp 1960.
  • ManpowerGroup: Truist Securities cut the target to $80 from $92. Maintains hold rating.
  • Royal Gold: Cantor Fitzgerald downgrades to hold from buy. PT up 9.8% to $145.
  • SeaWorld: Morgan Stanley initiated coverage with a recommendation of overweight. PT set to $70.
  • Six Flags: Morgan Stanley initiated coverage with a recommendation of equal-weight. PT set to $29.