MARKET WRAPS
Stocks:
European stocks struggled for momentum on Thursday as U.S. debt-ceiling jitters continued to weigh on market sentiment and after Germany's first-quarter GDP got surprisingly revised down, and the country entered a technical recession.
Fitch put the U.S. on negative watch Wednesday as U.S. lawmakers struggle to reach an agreement on raising the debt ceiling ahead of a June 1 deadline.
"Time is ticking, prompting a bout of market nervousness as the deadline draws close," Interactive Investor said.
Germany's GDP revision probably means the eurozone's economy flatlined in the first quarter, rather than expanding by 0.1%, Capital Economics said.
Track the markets and analyst reactions to the GDP data.
Stocks on the Move
Shares in Europe's semiconductor manufacturers were boosted by upbeat projections from chip giant Nvidia.
Dutch peer ASM led gainers on the Stoxx 600 index, rising 7.6%; ASM is among European players most exposed to an AI boom, Equita Sim said.
BE Semiconductor and ASML rose 5% and 6.8%, respectively, while VAT Group gained 6%.
Other Stocks to Watch
Standard Chartered is set to benefit from the Asia wealth opportunity and momentum as well as the structurally lower capital intensity of the region which drives higher buyback estimates, Jefferies said.
"Efforts over the past years to make STAN more efficient and less capital-intensive will allow it to fully benefit from a recovery in wealth business as Asia re-opens and fund flows accrue to the region on structural grounds," it said, noting the bank is well positioned to financially benefit from those prospects this time around.
Jefferies now sees management delivering on its over 11% return on tangible equity forecast by 2024 and estimate it at 12% for the year.
It rates the stock buy.
U.S. Markets:
Stock futures traded mixed but Nasdaq jumped after chip giant Nvidia issued a strong sales forecast due to rising demand for artificial intelligence technology.
Nvidia's stock rose nearly 25% premarket, boosting other chip-makers and shares tied to the AI boom.
Read Nvidia Earnings Spark Huge AI Stock Rally. The Hype Keeps Building.
Other Stocks to Watch
American Eagle Outfitters was down 20% after it said it expected fiscal second-quarter revenue "down low-single digits to last year."
Cloud specialist Snowflake was falling 14% after saying it expects fiscal second-quarter product revenue of $620 million to $625 million, below Wall Street estimates of $647 million.
Shares of software company Splunk rose 9% after the company reported an adjusted profit in the fiscal first quarter of 18 cents a share, well ahead of the loss of 13 cents expected by Wall Street, and revenue that rose 11% from a year earlier.
Economic updates set for release include the weekly initial jobless claims data, the second reading of first quarter GDP, and pending home sales for April.
Follow WSJ markets coverage here
Forex:
Sterling's positive reaction to Wednesday's higher-than-expected U.K. inflation data was brief given concerns that the Bank of England will struggle to contain price pressures due to factors outside its control, Commerzbank said.
Inflation is "eroding the domestic purchasing power of the British currency at a high rate--which is not positive for its purchasing power on the FX market," Commerzbank added.
The lack of cheap labor from Europe and the rising cost of trading goods with Europe due to new customs and regulatory borders are among the factors fuelling inflation, it said.
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EUR/USD fell to a two-month low of 1.0716 following the German GDP data.
Meanwhile, the dollar edged higher as a lack of progress in the debt ceiling talks pushed investors towards safe-haven assets, according to UniCredit Research. The currency gained come despite Fitch putting the U.S. on negative watch.
"USD/JPY hitting new year-to-date highs close to 140 is further proof of the current strength of the greenback [dollar]," UniCredit said.
Read Fed Minutes Firm Rate Rise Bets, Lifting Dollar
Bonds:
Eurozone government bond yields trade higher, but the 10-year Bund yield looks to find resistance at 2.50%, Commerzbank said.
"The 2.5% mark in 10y Bund yields is proving to be a hard nut to crack."
The latest talk on a U.S. debt-ceiling extension was rather encouraging, but as long as this tail risk remains, Bund dips look set to be bought, "albeit with limited conviction as the announcement of a deal could become costly for longs," Commerzbank said.
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The 10-year Greek-German government bond yield spread has reached Citi's target of 140 basis points and looks to stabilize there until the second election in June.
The recent spread narrowing has been driven by the market's pricing of the possibility that Greece gets an investment grade rating soon, Citi added.
A similar performance by the incumbent New Democracy at the second election could spur some further spread tightening in the very near-term, it said.
Read European Credit Spreads Don't Reflect US Debt-Ceiling Risks
Energy:
Oil prices edged lower but held onto the bulk of gains made this week following bullish inventory data and a warning from the Saudi Arabia energy minister.
"These comments from the Saudi energy minister have likely increased market expectations that the group may reduce output further," ING said.
Metals:
Base metals were slightly firmer, with gold prices weaker, as worries over the U.S. debt ceiling and uncertainty about the Fed's next move on rates, dominating markets.
"[The] Fed meeting minutes were hawkish," Peak Trading Research said. "Fed members will remain data-driven and won't commit to pausing interest rate hikes."
Peak added that the hawkish tone is good for the dollar and bad for commodity markets.
DOW JONES NEWSPLUS
EMEA HEADLINES
Germany Entered Recession After 1Q GDP Estimate Revised Down
The German economy entered a recession, after it contracted by more than in initial estimates in the first quarter, as household expenditure was squeezed by high inflation.
Germany's gross domestic product contracted 0.3% compared with the previous three-month period, according to a second estimate released Thursday by German statistics office Destatis, lower than the first estimate, which showed the economy flatlined.
German Consumer Sentiment to Improve in June on Stronger Wage Expectations
Consumer confidence in Germany is expected to rise for the eighth consecutive month in June, albeit at a slower rate of improvement, as income expectations brightened on more optimistic views of wage increases, despite a continued high cost of living.
Germany's forward-looking consumer-sentiment index forecasts confidence to tick up to minus 24.2 in June from a revised minus 25.8 in May, the strongest level since April 2022, according to data from market-research group GfK published Thursday.
Italy's Market Likes the New Prime Minister. She's Showing Her Moderate Side.
Giorgia Meloni wasn't elected to comfort the afflicted.
The Italian prime minister, who swapped her trademark white suit for jeans this past week to wade through flooded villages in the Emilia-Romagna region, swept to power last autumn on a right-populist platform of containing immigration, slashing taxes, and sticking it to the overbearing eurocrats in Brussels.
Generali Confirms Targets After 1Q Earnings Rise
Assicurazioni Generali on Thursday posted rising earnings for the first quarter and backed its strategic plan view for the period 2021-24.
The Italian insurer posted gross written premiums of 22.17 billion euros ($23.84 billion) in the quarter, up from EUR21.53 billion the year prior, and a consolidated operating result of EUR1.82 billion, from EUR1.49 billion the year prior.
Ericsson Says US Court Has Dismissed Shareholder Lawsuit
STOCKHOLM-Ericsson said Thursday that a U.S court has dismissed a claim by certain shareholders that the company misled investors over its business dealings and compliance in Iraq.
Ericsson said the court rejected in full the plaintiff's claims that the company misled investors and concluded that it didn't violate any disclosure obligation to investors.
Coca-Cola HBC Raises Medium-Term Revenue Growth Target; Backs FY 2023 Views
Coca-Cola HBC AG said Thursday that it has updated its medium-term financial targets, now aiming for higher revenue growth and earnings margin expansion, and backed its fiscal 2023 expectations.
The bottler for Coca-Cola Co.-listed in both London and Athens-said beyond 2023, it is now targeting average annual organic revenue growth of 6%-7%, up from its previous target of 5%-6% a year.
GLOBAL NEWS
Fitch Considers U.S. Rating Downgrade as Debt Talks Drag
Fitch Ratings is reviewing whether the U.S. should retain its top credit rating as the White House and Republicans struggle to reach an agreement on raising the debt limit.
Fitch said Wednesday evening it had placed the U.S. triple-A credit rating on "rating watch negative." While the ratings firm said it still expects Democrats and Republicans to reach an agreement on raising the debt limit, it said there was a greater risk it could fail to do so in time. Treasury Secretary Janet Yellen has said the U.S. could begin missing payments as soon as June 1.
Inside Wall Street's Playbook to Prevent Debt-Ceiling Chaos
Wall Street is breaking out its doomsday playbook for how to survive a U.S. default.
The industry's primary goal: keep the financial markets functioning. Many fear everything from computer glitches to cascading panic if the U.S. misses payments on Treasurys, which are a bedrock of trading and usually considered almost as safe as cash.
McCarthy addresses debt-ceiling angst: 'I would not, if I was in the markets, be afraid of anything'
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05-25-23 1020ET
