MARKET WRAPS
Watch For:
Germany WPI; France CPI; trading updates from Repsol, Hermes International
Opening Call:
European shares may open higher Friday as attention turns to the corporate earnings season. Asian stock benchmarks were mostly higher; the dollar fell slightly; Treasurys steadied; and oil and gold rose.
Equities:
Stock futures point to slight gains in Europe on Friday, as investors parse mixed signals about the global economy and the path for interest rates.
Optimism that inflation is easing increased, after U.S. producer prices unexpectedly fell in March.
"We have now clear signs that inflation is decelerating as expected, so that's positive," said Nadège Dufossé, global head of multiasset at Candriam. "But we also know that economic data will probably continue to weaken, and if we have a harder-than-expected recession in the U.S. of course that's not integrated in the valuation of equity markets."
"Concerns about inflation appear to be playing second fiddle behind worries that the economy is moving closer to recession with today's PPI depicting demand for manufactured goods declining, while unemployment claims data points to a labor market that continues to cool," said José Torres, senior economist at Interactive Brokers.
Stocks have rallied lately in part because of the belief that easing price pressures will propel the Federal Reserve to pare its aggressive rate-hiking campaign. Investors are wagering that the Fed won't raise rates after May, if at all, interest-rate futures suggest.
"We wouldn't be surprised at 25 basis points, but again, the big picture is that we're closer to the end. There's not much beyond that," Stephen Lee, founding principal at Logan Capital Management, said about the Fed meeting in May.
The next catalyst for markets could be earnings season, with Wall Street banks including JPMorgan and Citigroup due to report Friday.
Read: Inflation data's outsize impact on stocks is fading after becoming a marquee event for markets in 2022
Forex:
The U.S. dollar weakened slightly, amid hopes that the Fed is nearing the end of its rate-increase cycle. These hopes have been fueled by recent U.S. economic data, said MUFG Bank.
The data have shown a stable labor market together with inflation not surprising on the upside, which may help with current trends of a weaker USD, MUFG added.
Oanda's Edward Moya said "it's one of those key moments where we look at the economic data pointing to signs of weakness in jobless claims, a PPI coming down and rate-cut bets getting a boost, and see the focus shifting not on how much the Fed might raise rates, but how aggressively will they cut rates and when will it happen."
Moya still believes there will be a rate rise in May but cautions that if bank earnings season points to more contagion, "all bets are off," and the Fed will likely hold-off on another rate hike, he said.
Bonds:
Treasury yields were steady early Friday after closing mostly higher overnight.
U.S. wholesale prices sank 0.5% last month in a sign of potentially further easing in inflation ahead, and the increase over the past 12 months slowed to 2.7% from 4.9% in the prior month.
"We expect the delayed effects of monetary tightening to become a bigger drag on activity, pushing most advanced economies into recession in the second half of the year," said Jennifer McKeown, chief global economist, and Ariane Curtis, global economist, at Capital Economics.
This should help to "clear the path for central banks to end their tightening cycles."
Energy:
Oil futures ticked up in Asia amid weakness in USD. A weaker USD as well as China's economic recovery offer bullish drivers for the oil market, said Tina Teng, markets analyst at CMC Markets.
Data Thursday showed that China's exports bounced back sharply in March.
"The expectation that consumer demand will firm markedly in China as the economy continues to recover from the impact of strict economic lockdowns is another supporting factor for oil markets this week," said Tyler Richey, co-editor at Sevens Report Research.
Metals:
Gold futures rose slightly early Friday, buoyed by increased Fed rate cut bets spurred by falling U.S. producer prices and rising jobless claims.
The precious metal is just a "hop, skip and a jump" from a record high, although a large retail sales decline and a disappointing beginning to banks' earnings could be needed for gold to get there, said Edward Moya, senior market analyst at Oanda.
"The move in gold prices is catching many off-guard, with even skeptical gold bugs in a bit of disbelief that this may indeed be the move which propels gold to all-time-record highs," said Peter Spina, president of GoldSeek.com.
"What we are seeing is the initial phase of the next bull cycle in gold, " he said. "It is a stealth bull market move with very few western investors yet participating, but with the recent price moves, starting to get noticed."
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Copper rose in Asia amid demand hopes. Chinese trade data has given base metals a boost as it points to resilient global demand, said TD Securities.
The risk-on tone of the data has spurred some covering of short-copper positions, TD added.
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Chinese iron-ore futures advanced, reversing from Thursday's decline of over 3%.
The short-term disturbance in ore supply caused by the Australian tropical cyclone has waned. Prices are refocusing on fundamentals, and demand still remains strong, said Baocheng Futures.
TODAY'S TOP HEADLINES
Gold Prices Near Record as Investors Bet Inflation Is Here to Stay
Gold prices hit their highest level of the year on Thursday, driven by bets that inflation will remain sticky despite recent declines.
The most actively traded gold-futures contract rose to $2,055.30 a troy ounce, up 13% year to date. That also put it within striking distance of its record high, reached in the summer of 2020.
BOJ Gov Tells G-20 That Japan Will Keep Easing Monetary Policy
Bank of Japan Gov. Kazuo Ueda said he told the Group of 20 forum that the bank needs to maintain its monetary policy easing stance, with inflation expected to slow soon.
Japan's consumer inflation, which was at around 3% in February, is expected to fall below the bank's 2% target toward the latter half of this fiscal year, which started in April, Mr. Ueda said at a news conference in Washington, D.C.
Russia Could Consider Swap for WSJ Reporter Evan Gershkovich After Trial Ends
Russia could consider the possibility of a prisoner exchange for jailed Wall Street Journal reporter Evan Gershkovich only after a Russian court renders a verdict on an espionage allegation against the 31-year-old American, according to a senior Russian official.
Deputy Foreign Minister Sergei Ryabkov told the state news agency TASS on Thursday that "the issue of exchanging anyone can be considered after the court issues its verdict specifically on a particular charge," he said.
Norway to Expel 15 Russian Diplomats Accused of Espionage
Norway said it would expel 15 Russian diplomats for conducting intelligence activities under diplomatic cover, an unprecedented move for the Scandinavian nation that illustrates the growing espionage threat in Europe in the wake of the war in Ukraine.
The Russian diplomats, working out of the embassy in Oslo, would be expelled shortly for conducting "activities that are incompatible with their diplomatic status," Norwegian Foreign Minister Anniken Huitfeldt said Thursday.
Boeing Pauses MAX Deliveries After Parts Problem
Boeing Co. said it was pausing deliveries of some 737 MAX jets because of incorrectly installed parts, disrupting an important business line as the plane maker seeks to improve its finances.
The company said Thursday there would be a significant impact on near-term deliveries of the 737 MAX 7, 737 MAX 8 and larger MAX 8-200 jets, as well as the P-8 military reconnaissance planes that are also based on the 737.
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Expected Major Events for Friday
05:00/FIN: Feb Retail sales
05:00/FIN: Mar CPI
06:00/GER: Mar WPI
06:00/SWE: Mar CPI
06:30/SWI: Mar Import Price Index
06:30/SWI: Mar PPI
06:45/FRA: Mar CPI
07:00/SPN: Mar CPI
07:00/SVK: Mar CPI
07:00/SVK: Mar Core & net inflation development
08:00/EU: Mar Long term interest rates statistics
08:00/FRA: Apr IEA Oil Market Report
08:00/POL: Mar CPI
08:00/POL: Feb Merchandise trade
15:59/UKR: Feb Trade
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
04-14-23 0023ET
