MARKET WRAPS
Watch For:
Housing Starts for March; Canada CPI for March; earnings from Bank of America, Bank of New York Mellon, Goldman Sachs, Johnson & Johnson, Lockheed Martin, Netflix, United Airlines
Today's Headlines/Must Reads
- Tesla Faces a Tougher Road Ahead in China
- China's Economy Rebounds After Three Years of Zero-Covid Isolation
- Few Banks Are Hedging Interest-Rate Risk
- Analysis: A Persistent Holdout in the Fed's Inflation Fight Leads to the Bakery Aisle
- G-7 Countries Claim Unity on China After Macron Comments
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Opening Call:
Moves across equity futures were positive on Tuesday but meagre, as traders waited for the first quarter earnings season to slip back into gear after a quiet start to the week.
Results so far have been generally well-received and this has helped the S&P 500 to hold near the top of the 3,800 to 4,200 range it has occupied for about five months as softer inflation data of late has also reduced concerns about faster Federal Reserve rate rises.
"The S&P500 is approaching the highest levels reached in February, as the market focus is shifting back to economic and corporate data," Swissquote Bank said.
"Stronger-than-expected earnings could give a hand to equity bulls," it added, but warned this could falter if recent signs of U.S. economic resilience pushed yields back higher.
And data out of China on Tuesday suggested an important growth driver of the global economy was improving, with GDP up 4.5% in the first quarter, boosted by increased consumption and retail sales, after authorities abruptly abandoned the stringent "zero-Covid" strategy.
Read China's Economy Rebounds After Three Years of Zero-Covid Isolation
Chinese stocks ended mixed after the data, while elsewhere in Asia, Hong Kong's Hang Seng Index fell 0.6%.
In Europe, the pan-continental Stoxx 600 rose 0.2%.
Stocks to Watch
Avenue Therapeutics on Monday said it received meeting minutes from the FDA for the development of intravenous Tramadol, a pain killer. Its shares rose 16% in after-hours trading.
Digital Brands posted a wider loss in its latest quarter. Its shares dropped 16% after hours.
ADRs of Ericsson fell 4% in premarket trading after the company said it expects the operating environment in 2023 to remain "choppy" following first-quarter earnings that fell from a year earlier.
Forex:
The dollar edged lower in Europe, having strengthened in recent days as short-dated Treasury yields rose, and any gains now look likely to be limited, according to UniCredit Research.
Signs the dollar rebound might progressively run out of steam "have already emerged," it said, pointing to investors' caution ahead of U.S. and eurozone rate decisions in early May.
Sterling has received a boost from strong U.K. wage data, even as the jobless rate rose slightly, ING said.
The currency has enjoyed a modest lift from the data as it has increased expectations the Bank of England will raise interest rates next month.
"Unless we see some significant slowing in U.K. March services inflation [released Wednesday], it increasingly looks like the BOE will hike [interest rates by] 25bp after all."
Read ECB's More Restrictive Stance Lifts Euro
Bonds:
Ten-year Treasury yields have seen their prominent highs and are likely to hover at levels just below the 3.5% mark in the coming weeks, Metzler said.
"With inflation rates falling and the Fed sending a clear message that nothing more can be expected in this direction after the rate hike in May, we expect a sideways movement at the long end of the yield curve."
Metzler said weakening economic development in the second half of the year should ensure the inversion of the two- to 10-year segment of the curve will probably persist throughout 2023.
Read Next Support Level for 10-Year Bund Yields Seen Slightly Higher
Energy:
Oil prices held gains in Europe after data showed China's economic rebound was progressing faster than expected, with many investors betting the country's post-Covid reopening will support a further advance for crude over the coming year.
Still, a strong dollar has weighed on oil prices in recent days, ING said.
Metals:
Base metals and gold moved higher in early European trading, with China's economic rebound in the first quarter helping boost sentiment around demand.
TODAY'S TOP HEADLINES
Tesla Faces a Tougher Road Ahead in China
HONG KONG-Volkswagen and Mercedes are among the global auto brands that flocked to Shanghai this week to showcase their latest electric vehicles, competing against a crowded field of fast-emerging local rivals in the world's biggest market for the cars.
One notable absence: Elon Musk's Tesla Inc.
Safe Security Raises $50 Million in Series B Round
Cybersecurity company Safe Security has raised $50 million in Series B financing as insurers and regulators drive efforts to assess cyber risk, boosting interest in its wares.
The Palo Alto, Calif.-based company, whose formal name is Safe Securities Inc., makes software that quantifies the probability of breaches and their likely impact by pulling data from a company's existing cybersecurity products and analyzing gaps in defenses.
UPS and Teamsters Kick Off Contract Negotiations
Part-timers and weekend drivers are expected to be among the key points of debate as the Teamsters and United Parcel Service Inc. begin talks this week on the largest collective bargaining agreement in the U.S.
The parcel-delivery industry has changed since the International Brotherhood of Teamsters and UPS last signed a five-year agreement in 2018. UPS and rival FedEx Corp. have become more focused in recent years on delivering more profitable packages rather than increasing volume.
DOJ Opposes Protection for Johnson & Johnson in Second Talc Bankruptcy
Justice Department officials criticized Johnson & Johnson's renewed effort to settle its mass talc liabilities through chapter 11, saying it doesn't deserve continued protection from tort lawsuits because it is doubtful that enough claimants will accept the company's offer.
The agency's Office of the U.S. Trustee, which monitors the nation's bankruptcy courts, said on Monday that J&J's second effort to resolve its talc liabilities through bankruptcy should fare no better than its first, which was officially dismissed by a federal appeals court this month. About two hours after the dismissal, J&J placed its LTL Management LLC subsidiary into chapter 11 a second time to try to keep roughly 40,000 pending talc-related lawsuits against the company from advancing.
Florida Gov. Ron DeSantis Sets Stage for Legislative Action Against Disney
Florida Gov. Ron DeSantis said coming legislation would nullify agreements that Walt Disney Co. struck in February to maintain substantial control over the land near Orlando where its theme parks are located, the latest round in a continuing battle between the governor and the entertainment giant.
Mr. DeSantis accused Disney of defying his administration and the legislature by securing those agreements with a local board whose members the company effectively selected, just weeks before a new board picked by the governor was poised to take over. The agreements, which were struck in public meetings, include a 30-year land-development contract that locks in scores of zoning, infrastructure and air-rights approvals that the company might need if it chooses to expand its Walt Disney World Resort.
Ericsson Cautions on Choppy Year With Poor Visibility
Ericsson AB on Tuesday posted a smaller-than-expected drop in first-quarter net profit but cautioned that the operating environment will remain choppy in 2023 with poor visibility as operators remain cautious with spending plans and continue to adjust inventories.
The Swedish telecommunications-equipment company said that customers in early 5G markets have slowed their deployment pace somewhat, while some customers have also lowered elevated inventory levels built up in a tight supply environment. It expects this inventory adjustment to be mostly completed during the second quarter but might spill into the third quarter.
GSK to Acquire Canadian BELLUS Health for Around $2 Bln
GSK PLC said Tuesday that it has reached an agreement to buy the late-stage biopharmaceutical company BELLUS Health Inc. for $14.75 a share in cash, representing a total equity value of around $2.0 billion.
The pharmaceutical giant said the deal will provide access to camlipixant, a treatment for refractory chronic cough currently in phase III development.
China's Economy Rebounds After Three Years of Zero-Covid Isolation
SINGAPORE-China's economy rebounded in the first three months of the year after Beijing dismantled its heavy-handed Covid-19 controls, teeing up a revival in growth that is expected to buoy the global economy as the U.S. and European economies slow.
China's economy expanded 4.5% in the first quarter of the year compared with the same three months a year earlier, China's National Bureau of Statistics said Tuesday, a better performance than the 4.0% pace expected by economists polled by The Wall Street Journal.
Few Banks Are Hedging Interest-Rate Risk
Few U.S. banks protected themselves against rising interest rates during the Federal Reserve's monetary-tightening campaign last year, according to a research paper that says unhedged securities holdings are more widespread than investors might realize.
The paper-"Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening?"-contends that hundreds of other banks share that risk, which played a role in the collapse last month of Silicon Valley Bank. The paper didn't single out individual institutions, instead presenting an analysis of aggregate data.
Warren Buffett and Japan's Trading Titans Would Be Formidable Allies
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04-18-23 0614ET
