MARKET WRAPS

Watch For:

U.S. Weekly Jobless Claims; Royal Bank of Canada annual shareholders meeting; Federal Reserve Bank of St. Louis President James Bullard speaks at University of Missouri Breakfast Presentation.

Opening Call:

Stock futures edged higher and a selloff in U.S. government bonds stabilized as investors digested the possibility of more aggressive monetary tightening by the Federal Reserve.

Futures for the S&P 500 edged up, a day after the benchmark gauge fell 1%. The selloff Wednesday followed the release of minutes from the Fed that showed central bankers considered raising rates by a half-percentage point at their March meeting, higher than the quarter-point increase with which they proceeded.

The gentle gains in stock futures suggested U.S. indexes could chip away at some of the losses recorded in the last few days, as investors sold riskier assets in anticipation of a more hawkish Fed. Even after losing 2.2% in the last two sessions, the S&P 500 is now down just 6% for 2022, a comeback from its more than 12% loss at its low this year. Analysts say the recent steadying in some commodities prices has aided the stock market's performance.

In New York trading, shares of HP surged 11% after Warren Buffett's Berkshire Hathaway disclosed in a filing Wednesday that it had purchased nearly 121 million shares of the electronics maker, worth more than $4.2 billion based on Wednesday's closing price.

Twitter rose 0.9% premarket as investors continued to digest the implications of Tesla chief executive Elon Musk's stake in the social-media company and his appointment to its board. Shares of Tesla added 1.6% before the opening bell.

Shares of Amazon.com ticked up 0.6%. On Wednesday, the Journal reported that federal securities regulators are investigating how the megacap tech company has disclosed some details of its business practices, including how it uses third-party-seller data for its private-label business.

Later Thursday morning, investors will parse the latest initial jobless claims data, which are a proxy for layoffs. Economic data continues to point to a strong labor market in which employers are holding on to their workers amid high demand.

Market Insight:

Fed Chair Powell has been more aggressive than investors had been anticipating in his plans to tighten monetary policy, leaving the market scrambling to catch up, Sam Vereecke, chief investment officer for fixed income at Degroof Petercam Asset Management, said.

"We haven't had a situation like this in 40 years, with high prices and central banks struggling to control them," he said.

Even then, the previous economic environment and the position of central banks were quite different from today, which means the market doesn't have the benchmarks that would allow it to price accurately, he said. The market has entered "discovery mode," he said.

Stocks to Watch:

Meta Platforms' financial arm, Meta Financial Technologies, has been exploring the creation of a virtual currency for the metaverse, the Financial Times reported, citing people familiar with the matter.

So-called "Zuck Bucks" would be in-app tokens controlled by the company, rather than a cryptocurrency on the blockchain, the report said, which is similar to the Robux currency in Roblox.

Meta is also looking into the creation of tokens and coins to reward influential Facebook or Instagram users, the report added.

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Read Barrons.com: Tesla's Shanghai Plant Closure Eventually Will Impact the Stock. Knowing When Is Hard to Predict.

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Walmart-backed Flipkart is planning a U.S. initial public offering in 2023 instead of 2022 and has increased its IPO valuation target to $60 billion-$70 billion from $50 billion earlier, Reuters reported, citing two sources.

The U.S. IPO is being delayed owing to the Indian e-commerce company's plan to raise valuations further by focusing on two of the company's businesses, travel bookings and online healthcare services, Reuters reported, citing the two sources.

Forex:

CBA thinks the dollar is near its peak, with a substantial tightening cycle priced in. Kristina Clifton, currency strategist at CBA expects the FOMC to increase the funds rate by 50 bps in May and June, adding that James Bullard will likely reiterate his hawkish views on FOMC policy in a speech in London later Thursday.

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The Russian ruble rose after Italian Prime Minister Mario Draghi said that the EU isn't considering halting gas imports from Russia. USD/RUB falls to a six-week low of 78.9540, according to FactSet.

Draghi's comments suggest a full EU embargo on Russian energy is still a long way off, which will probably frustrate the U.S. given the ruble has recovered to pre-invasion levels, ING analysts said.

"It seems only a full sanction of Russian energy (Russian gas sales generate about $10bn in FX per month) will be enough to see the ruble coming under severe pressure again--even if Russia does end up defaulting on its sovereign Eurobonds--as recent U.S. Treasury measures seem to intend."

Bonds:

In Treasury markets, the yield on the 10-year U.S. Treasury note traded around 2.570%, down from 2.606% Wednesday. Still, the yield on the benchmark is hovering around its highest level in three years.

Commodities:

Oil was around 1% higher in Europe but remained close to its lowest level in three weeks after concerted efforts from members of the IEA to release oil from reserves weighed on prices.

The IEA is set to release 60 million barrels, adding to the U.S.'s 180 million barrels over six months. While the amount being released is huge, it will take time to reach the market and likely won't be enough to make up for lost Russian oil, ANZ Bank said.

Moreover, it will likely make U.S. oil producers more reluctant to increase their own output and takes the political pressure off OPEC over its constrained supply.

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Precious metal prices rose as investors looked toward safe-haven assets in the face of equities falling globally, while base metals were largely flat.

A rising dollar--furthered by comments from the Fed on possible rate hikes--and weak demand in mainland China alongside other parts of Asia contributed to the relatively muted price action.

Other News:

Goldman Sachs said the relationship between copper prices and the global macroeconomic environment appears to be weakening, as "ESG, geopolitics and chronic underinvestment [are] all driving copper fundamentals far more than overall global growth."

Copper market "fundamentals were once so connected to global growth [that] copper has been viewed as having a 'PhD' in macroeconomics. Yet today, 'Dr. Copper' no longer exists," Goldman Sachs said.

It believes copper prices are now more connected to public-policy matters, "rallying on concerns of Chilean mining royalties, accelerating European renewables demand and Russian sanctions supply risks rather than falling global growth expectations."

Fitch said copper prices are being supported by a tight supply outlook.

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"Global inventories [are] at critically low levels," Fitch said. Production is also likely lackluster, with only "small increases in output [which] will be driven by Chinese production while Latin American production will continue to lag."

Fitch, which raised its average 2022 copper-price forecast to $10,000 a ton from $9,200 a ton previously, said that "China's zero Covid policy is likely to invoke uncertainty in the country's copper production outlook."

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Fitch also said nickel prices on the LME could consolidate in the $30,000-$40,000 a ton range in the second quarter as Western sanctions on Russia support prices. Fitch expects prices to drop to under $30,000 a ton by year's end amid weaker consumption growth in the medium term.

Fitch raised its 2022 average forecast to $27,500 a ton from $17,000 a ton, which compares with $18,466 in 2021. "Ultimately, Western sanctions on Russia mean that the supply outlook for nickel over the coming years has deteriorated."

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The lithium-mining industry is likely to gravitate closer to spot pricing, especially if the commodity's rally continues, UBS said.

Today, there is a big difference between spot prices and the average price miners receive, in large part because a greater proportion of sales are often locked in early at a fixed price. For comparison, UBS highlighted the iron-ore market, where evolving market dynamics eventually made the difference between spot and fixed prices unworkable.

Now, some lithium producers are also signaling a shift away from fixed prices, which are less common among new entrants than incumbent suppliers. "Overall, this should see a further narrowing between industry realization and the spot price."


TODAY'S TOP HEADLINES


Shell Warns of Up to $5 Billion Hit From Russia Exit

Shell PLC said it expects to book accounting charges of up to $5 billion in the first quarter related to its decision to exit its Russia operations, including joint ventures with energy giant Gazprom PJSC, in the wake of Russia's invasion of Ukraine.

The London-based oil major provided the guidance Thursday ahead of quarterly earnings scheduled for May 5.


Tanker Operators Frontline and Euronav Propose All-Stock Merger

Norwegian shipping firm Frontline Ltd. Thursday announced a proposed merger with Belgian peer Euronav NV to create a global oil tanker business worth $4.2 billion.

Frontline, 39%-owned by Norwegian billionaire shipping magnate John Fredriksen, said the all-stock deal is based on an exchange ratio of 1.45 Frontline shares for every Euronav share, resulting in Euronav shareholders owning around 59% of the combined group and Frontline shareholders owning 41%.


Tesla to Host Homecoming 'Cyber Rodeo' in Texas

Tesla Inc. is slated to open the doors to its new Austin-area auto assembly plant on Thursday, less than a month after inaugurating a similar factory in Germany.

(MORE TO FOLLOW) Dow Jones Newswires

04-07-22 0607ET