MARKET WRAPS

Watch For:

ECB interest rate announcement; updates from Publicis, Hermes, Vinci, Beiersdorf, WPP, Ashmore, Mediclinic, X5 Retail

Opening Call:

Stocks in Europe should post modest gains on Wall Street cheer, although caution ahead of the ECB and Lagarde will likely temper any advance. In Asia, most major benchmarks were higher; the dollar and Treasury yields weakened further; while oil and gold dipped into the red.

Equities:

European shares are set for a slightly firmer start Thursday after U.S. stocks climbed for most of Wednesday, closing just below session highs.

Wall Street's gains were led by Nasdaq as bond yields slipped on hopes inflation may have peaked and despite disappointing earnings from JPMorgan Chase.

Stock-market bulls are looking for corporate earnings reports to take the focus away from the inflation surge that has ratcheted up Federal Reserve interest rate-hike expectations and has sent Treasury yields sharply higher so far this year.

"It's a bit of a relief rally on the back of falling bond yields," said George Catrambone, head of Americas trading at DWS Group. "But the inflation story is still staring us right in the face."

Despite hopes that inflation may have peaked, Catrambone said positioning in stocks has been "pretty fragile," given uncertainty around high energy and commodity prices, and whether the Fed can achieve its desired economic "soft landing" as it tightens financial conditions.

Economic Insight:

Fitch has cut its 2022 eurozone growth forecast while raising its inflation forecasts for the region. Fitch said it expects eurozone growth this year at 3%, 1.5 percentage points below its previous forecast.

Meanwhile, Fitch now expects eurozone inflation to average 5% this year, from 2.6% in December. Fitch also said it continues to forecast narrower deficits in nearly all eurozone member states this year, "partly due to last year's outperformance, but we expect their updated Stability Programs to show slower fiscal consolidation strategies in response to the Ukraine conflict."

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U.K. exporters relying on the EU for their business took a tumble last year amid problems caused by the UK's EU exit, according to official data.

The number of UK exporters solely doing business with the EU fell 33% to 18,357 in 2021, from 27,321 in 2020, according to HM Revenue & Customs data cited by accountancy firm UHY Hacker Young, though HMRC stressed that data-collection techniques have changed since the UK left the EU. The drop was due to the extra red tape UK businesses now face in exporting to the bloc, UHY said.

"These are really worrying numbers and show the scale of the difficulties UK businesses now face," UHY Senior Manager Michelle Dale said.

Forex:

The dollar continued to weaken against a basket of currencies on improving risk appetite driven by factors including moderating prospects for U.S. inflation.

Fed Gov. Christopher Waller's comments Wednesday indicated that inflation could have peaked and might start to fall, MUFG Bank said in a research report, adding that the U.S. OIS market is now pricing in an additional seven rate increases this year, compared with 8.8 rate increases forecast at the start of the week.

Read: Fed's Waller Says Inflation May Have Peaked in March

Bank of America said despite sharp forex moves and a jump in FX volume in the first quarter, aggregate positioning didn't actually change by much and the market is long G10 FX other than the dollar.

The market also increased its positioning in non-USD G10 forex--although not by much--against both the dollar and emerging-market forex during the first bquarter, BofA said. "This appears surprising, taking into consideration the strength of the USD."

Bonds:

Treasury yields fell back further in Asia as investors continued to remain focused on Tuesday's release of the U.S. consumer-price index report, which has sparked debate over whether inflation has already peaked.

Société Générale's Subadra Rajappa, head of U.S. rates strategy, told MarketWatch by email that "while it is hard to read too much into one print, (Tuesday's) number bolsters the narrative that inflation is possibly peaking as we head into midyear when base effects are likely to support lower prints."

Read: Why Investors Got a `Head-Fake' from One Soft U.S. Inflation Number

Energy:

Oil prices dipped in early Asian trading but losses may be limited, analysts said. There are expectations of increasing fuel demand as pandemic-related restrictions are easing globally, CMC Markets analyst Tina Teng said in an email, noting that Delta has indicated a jump in bookings.

Oil settled at a 2-week high Wednesday after Vladimir Putin said negotiations with Ukraine had hit a dead end, raising concerns about further global losses of Russian oil.

Read Barrons.com: Oil's Comeback: Signs Emerge That U.S. Producers Are Ready to Drill More

Metals:

Gold edged lower on a possible technical correction after prices scored a fifth gain in a row Wednesday.

Analysts said the precious metal is likely to be supported by safe-haven demand, with traders hunkering down for a long-drawn-out war in Ukraine, said SPI Asset Management's Stephen Innes.

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Copper prices gained on the prospect that the pandemic's impact on China's growth may be limited. Indications suggest the effects will be minimal, with tight supplies likely to drain inventories in the medium term, ANZ said in a research report.

ANZ's Copper Demand Indicator shows consumption is holding up well, driven by a pick-up in China's power sector. This indicator tracks downstream copper demand, assessing activity growth against total market share of consumption across various sectors and has traditionally been a good guide to underlying demand and general economic activity.

Other News:

The London Platinum and Palladium Market's move to ban two Russian-state owned refiners from delivering material into London and Zurich last Friday is unlikely to have any material effect on the PGM market, analysts at Goldman Sachs said.

The bulk of palladium sales from Russia are sent directly to consumers rather than the LPPM, meaning supply to those who require it should be unaffected. Similarly, Russian material can be sent to other refiners outside of the country to be resmelted which would then allow it to be sent to the LPPM.

Goldman Sachs said palladium stocks are high enough that there should not be a supply squeeze, given auto production has been suppressed on the chip shortage.


TODAY'S TOP HEADLINES

Fed's Waller Endorses Half-Point Rate Increase This Spring

A Federal Reserve official endorsed raising interest rates by a half percentage point at the central bank's policy meeting next month as part of a strategy to raise rates to a level designed to ease economic growth by the end of this year.

"We're in a position where the economy is strong. This is a good time to do kind of aggressive actions because the economy can take it," Fed governor Christopher Waller said during an interview Wednesday on CNBC.


Trucking Boom Is Hitting the Brakes as Freight Demand Slows

The strong freight demand that has delivered bumper earnings for trucking companies during the pandemic appears to be waning, as inflation and sagging consumer sentiment slow an inventory restocking rush that has swamped distribution networks.

Rates on trucking's spot market are sliding and analysts have started to downgrade companies in the sector as truckers prepare to report first-quarter earnings in a market that is signaling growing economic uncertainty.


Bank of Korea Raises Rate for Fourth Time

South Korea's central bank raised its base rate on Thursday, further tightening policy to fight inflation.

The Bank of Korea increased its benchmark seven-day repurchase rate by 25 basis points to 1.5%, which was its fourth rate increase since August 2021.


Singapore Central Bank Tightens Policy for Third Time

SINGAPORE-Singapore's central bank tightened its monetary policy for the third time in recent months to slow inflation and help ensure medium-term price stability.

The Monetary Authority of Singapore on Thursday said it would recenter the midpoint of the Singapore dollar's policy band and slightly increase its rate of appreciation. It didn't make any change to the width of the policy band.


Bank of Canada Increases Interest Rates by Half-Percentage Point, Biggest Jump in Decades

OTTAWA-The Bank of Canada pulled the trigger on its biggest rate increase in over two decades and said further rises are necessary to tame domestic spending and keep long-term inflation expectations anchored closer to its 2% target.

The Bank of Canada lifted its target for the overnight rate by half a percentage point from 0.50% to 1.0%. In its latest policy decision, the central bank also said it would begin reducing the assets on its balance sheet, which expanded as it made large-scale asset purchases for the first time to stabilize financial markets during the pandemic. That process would begin April 25.


Yellen Warns Nations Staying Neutral in Russia's War With Ukraine

WASHINGTON-Treasury Secretary Janet Yellen said countries that maintain their ties to Russia after its invasion of Ukraine risk facing isolation from the global economy, sending a warning shot to nations that have so far remained neutral in the conflict.

As it has crafted with its allies a wide-ranging package of sanctions on Russia, the U.S. has urged China, a close partner of Russia, to not provide substantive aid to Russia or take steps to undercut the sanctions. It has also sought to push countries that haven't put penalties on the Russian economy, notably India, to take a tougher stance against Moscow.


Russian Forces Renew Focus on Southern and Eastern Ukraine

(MORE TO FOLLOW) Dow Jones Newswires

04-14-22 0036ET