MARKET WRAPS

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UK public sector finances, Bank of England asset purchase facility quarterly report; trading updates from ABB Banco Santander, UBS, Novartis, Kering, Carrefour, Vinci, Nestle, Danone, BMW, Petrofac, AB Foods, Whitbread Anglo American PLC, Anglo American Platinum, Akzo Nobel, Entain

Opening Call:

Shares may notch losses in Europe on Tuesday, while investors wait for a flood of corporate-earnings reports and further clarity on the path of interest rates. In Asia, stock benchmarks were mixed; Treasury yields were lower; the dollar softened; while oil is slightly lower and gold gained.

Equities:

European stocks could dip on Tuesday, as investors await a busy week of earnings and economic data that may help shape the U.S. Federal Reserve's next interest-rate decision on May 3.

Investors are turning their focus this week to Big Tech earnings. Amazon.com, Microsoft, Google parent Alphabet, Facebook parent Meta Platforms and Intel are among the companies scheduled to report in the coming days.

"What's weighing on the market is concerns about earnings and guidance, the potential for the Fed to keep raising rates, and the possibility that the economy may be slowing and heading into a recession," B. Riley Wealth said.

"It's not like we're all excited about growth," said Daniel Morgan, senior portfolio manager at Synovus Trust. "We're still seeing a pretty low bar coming into this quarter. I think we could get some surprises on the upside."

Trading activity is likely to remain subdued this week ahead of the Fed's May policy meeting "unless we see a material surprise coming through in the key earnings releases," BlackRock said.

"What we're looking for is around the impact of the inflationary backdrop, as well as the slowing economic growth and the impact that that has on curbing consumer demand," it said.

Forex:

The dollar nudged lower ahead of the U.S. Conference Board consumer confidence index due out later Tuesday.

Potential support for the USD Index from any surprises in that data can't be ruled out, said DBS Group Research. However, weaker data could cause USD/CHF to test its mid-April low, while EUR/USD and GBP/USD should test their mid-April highs, it added.

Forex investors may be overestimating the chances of a dovish pivot by the Fed this year, said Marc Chandler, managing director at Bannockburn. "I think that the market pricing in cuts this year is hampering the dollar's upside," he said.

According to the CME FedWatch tool, investors expect the Fed to hike by 25 basis points next week, hold it for a while and cut by as much as 50 bp through December. That goes against policy makers' own forecast, which doesn't include any cuts this year.

Chandler says investors could be misreading monetary policy. "I suspect the risk of a post-May hike is greater than the market thinks."

Bonds:

Treasury yields deepened losses as markets increasingly priced a rate increase by the Fed next week followed by cuts later this year.

News about the debt ceiling standoff and corporate earnings are likely to keep moving markets this week, ahead of Friday's PCE inflation data.

"It's tempting to look at the U.S. rates market and conclude that yields are lower simply because investors are worried about a deep recession later this year," said BMO Capital Markets.

"We're not in the soft-landing camp but will acknowledge the real economy and employment market have proven more resilient than we initially assumed. At least for now," it said in a note.

Energy:

Oil edged lower in Asia, even as China's economic rebound and expectations for first-quarter U.S. GDP buoyed sentiment.

Oil prices are likely to rise this week if "earnings continue to impress" and the U.S. posts "a solid 2.0% or better reading with first quarter GDP," said Oanda.

China reported better-than-expected first-quarter GDP growth last week and the world's largest oil importer's upcoming week-long holiday is likely to boost travel demand.

The halt of northern Iraqi oil exports via pipeline to Turkish ports, amounting to 450,000 barrels a day, has been a "fundamental tailwind for energy prices," said Sevens Report Research.

On Monday, it was reported that there have been further delays in negotiations between the Iraqi government, the Kurdistan regional government and the Turkish government "that are critical to getting those northern Iraqi oil flows restarted," it said.

Metals:

Gold climbed in Asia, as the dollar weakened on investors' growing expectation for a Fed rate cut.

"A weakening dollar is helping send bullion higher as investors start to grow more confident that the Fed will have to deliver more rate cuts next year," said Oanda.

Some investors reducing their dollar holdings in favor of safe-haven assets' has also lifted gold prices.

"Better than expected economic data, along with more resilient company earnings, has prompted a reassessment of the possible timing of when central banks might dial back recent rate increases," said CMC Market UK. "Gold currently has support at the $1,960 area," it said.

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Aluminum futures were steady, supported by supply-side issues.

Currently, a big part of China's Yunnan province is undergoing a severe drought, according to the country's National Climate Centre, Citi Research said.

If aluminum smelters reduce production further, this should tighten the market more, it said, noting the province's smelters have cut over two million tons a year of output since September 2022.

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Iron-ore prices edged lower, extending the downturn seen since last week, when Chinese officials signaled intentions to prevent price speculation in the steel-making commodity.

Galaxy Futures analysts said worries over policy uncertainties may weigh on buying sentiment and lead to a pessimistic price outlook in the near term.

It also noted that previous supply constraints at several Australian mines are easing, which could further cloud supply-demand dynamics for iron ore.


TODAY'S TOP HEADLINES

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Military spending rose by 3.7% to a record high of $2.24 trillion in 2022, according to data released Monday by the Stockholm International Peace Research Institute, a think tank known as Sipri. The figures mark the eighth consecutive year of spending growth.


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At 1426 GMT shares had tumbled more than 13% to EUR6.31.


Supreme Court Allows State-Law Climate Suits Against Oil Companies to Proceed

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A cash-and-stock deal could be announced as soon as this week, assuming the talks don't break down, the people said. The move is part of a transformation under way at Carrier, which is also working on a plan to sell or spin off its Fire & Security business segment, The Wall Street Journal previously reported.


How Bud Light Handled an Uproar Over a Promotion With a Transgender Advocate

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Options Narrow for People Trapped by Fighting in Sudan

Foreign governments continued to evacuate their personnel and dependents from Sudan on Monday, but for the millions of Sudanese and thousands of expatriates caught up in a lethal power battle between the country's top two generals, the options to get to safety were narrowing.

For a 10th day, the Sudanese military, commanded by Lt. Gen. Abdel Fattah al-Burhan, the country's de facto head of state, and Rapid Support Forces, a state-sponsored militia led by Gen. Burhan's deputy, Lt. Gen. Mohamed Hamdan Dagalo, exchanged artillery and gunfire, residents reported. Jet fighters circled above the capital, Khartoum, and other parts of the country.


U.S. Envoy Confronts Russian Diplomat on Evan Gershkovich Detention at U.N.

UNITED NATIONS-A senior U.S. diplomat demanded Moscow free Wall Street Journal reporter Evan Gershkovich and another detained American at a meeting of the United Nations Security Council led by her Russian counterpart.

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04-25-23 0015ET