MARKET WRAPS
Stocks:
European stocks were mostly lower on Wednesday as investors focused on another hot U.K. inflation print that will likely support the case for further Bank of England interest rate rises.
Annual inflation fell to 10.1% in March from 10.4% in February, but it was above the 9.8% expected by analysts in a WSJ survey.
"This will likely put pressure on the BOE to almost reluctantly continue with its interest rate hiking policy in May, adding further pressure to an already beleaguered consumer, where wage growth is being outstripped by inflation and with economic growth stalling," Interactive Investor said.
Read the market and analyst reactions to the data here.
Some mixed corporate news added to the cautious mood.
Shares in ASML, a critical supplier to the global chip-making industry, fell more than 2% after the company said it sees "mixed signals" on demand despite improving profit and sales.
Read more here .
Stocks to Watch
LVMH should prove able to maintain its sales momentum throughout 2023, according to HSBC.
The luxury titan booked 18% organic growth in the first quarter, beating expectations, driven notably by the mainstay fashion division, HSBC noted.
While the U.S. performance was one area of concern, easier comparison bases and the reopening of mainland China should help LVMH keep up the same pace of growth in the coming three quarters, HSBC said.
It has raised its target price on the stock to EUR1,030 from EUR999, keeping a buy rating.
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Volkswagen's exposure in China, where price wars are punching down its prices and where the car maker is losing ground in the electric vehicle market, is concerning, RBC said.
"Although VW has cut pricing--15-25% down for ID models--following Tesla's price cuts, others including Nissan, BYD, BMW, Ford, and Toyota have joined in as well, and we view it as unlikely that VW will see substantial volume gains without much steeper price cuts," RBC said.
Stellantis and GM are better options among mass-market car makers given expected headwinds over the next 12-18 months, RBC added.
It has lowered its price target on Volkswagen to EUR181 from EUR221.
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U.S. Markets:
Stock futures retreated as investors focused their attention on more corporate earnings reports.
The mixed nascent U.S. first quarter corporate earnings season has left stocks struggling to extend their recent rally. The S&P 500 remains stuck within, though near the top, of the 3,800 to 4,200 range it has inhabited for about five months.
Earnings are due later on Wednesday from IBM, Morgan Stanley and Tesla, among others, while the Federal Reserve's Beige Book of economic anecdote and a speech by New York Fed President Williams complete the calendar.
Stocks to Watch:
Netflix was down 2% in premarket trading after it issued a disappointing second-quarter outlook.
United Airlines reported a narrower-than-expected first-quarter loss and said travel demand was strong heading into the summer, especially for international flights. The stock rose 0.7%.
Western Alliance rose 15% in premarket trading after the regional lender said deposits in the first quarter have stabilized.
Follow WSJ markets coverage here .
Forex:
The euro looks to have less scope to gain on expectations for European Central Bank interest-rate rises and moves against the dollar are likely to revert to being driven by risk sentiment and dollar dynamics, ING said.
"Markets are pricing in 30 basis points of tightening in May, and a total of 82bp by October, which sets the bar quite high for a hawkish surprise: essentially, ECB members would need to open the door to another 50bp hike," ING said.
The proximity to the May meeting suggests ECB speakers will probably be "more cautious," leaving EUR/USD stuck around 1.09-1.10 in the coming days.
Meantime, the dollar gained slightly after Federal Reserve officials James Bullard and Raphael Bostic endorsed further interest-rate rises.
There are three more days for Fed officials to speak before the blackout period ahead of the May 3 meeting but there's unlikely to be any pushback from policymakers against the market's expectations for another rate rise, ING said. That means Fed rate expectations could stabilize after the volatility that lasted until late last week, it said.
"This could translate into a quieter environment and lower volatility for USD crosses in the run-up to the FOMC announcement."
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Sterling rose after U.K. inflation data exceeded analysts' forecasts, fuelling expectations the Bank of England will raise interest rates further.
U.K. inflation fell to an annual rate of 10.1% in March from 10.4% in February, above the 9.8% expected by analysts in a WSJ survey.
"Adding this number to the calculus, and barring any new financial accidents, we would expect at least two further quarter-point rate hikes before the BOE pauses," Mazars said.
Read Sterling's Gains After Data May Remain Limited
Bonds:
Eurozone government bond yields tracked their Treasury counterparts higher, with UniCredit Research highlighting speeches by several ECB officials, including some hawks, as a possible source of volatility.
For the time being, the door is open for either a 25bp or a 50bp rise in the deposit rate at the May ECB meeting, UniCredit Research said, adding that its own forecast is for a 25bp rate increase.
Energy:
Oil edged lower as demand concerns outweighed signs of falling inventories and despite strong China data.
Investors shrugged at Tuesday's stronger-than-expected Chinese GDP print, and seemed to be similarly unimpressed by API data that showed U.S. crude inventories fell last week.
"There are clearly still some concerns over the demand outlook," ING said. "Weaker refinery margins will be adding to these concerns."
Read UK's High Prices Aren't Reflecting Falling Commodity Costs
Metals:
Base metals and gold prices were lower with expectations of a Fed rate hike in May supporting the dollar.
"In the short term, we expect the Fed to remain hawkish as it battles inflation," ANZ Research said, adding, however, that it expects an eventual pause in rate hikes, which should boost demand for goods like gold.
Copper
Copper, the metal seen in high demand amid a global energy transition, is facing some near-term demand headwinds, Macquarie said.
"The bullish scenario that markets appeared to be pricing in early January is looking increasingly less likely to materialize, with Chinese indicators pointing to a mixed recovery, the lagged effects of monetary policy in Europe starting to appear and the outlook for the U.S. remaining cyclically challenging," Macquarie said.
In China, construction activity remains weak and consumer goods demand soft, although investment in renewable energy is a bright spot for the metal.
DOW JONES NEWSPLUS
EMEA HEADLINES
U.K. Inflation Stays Above 10%, Raising Prospect of Further Interest-Rate Increases
LONDON-The U.K.'s annual rate of inflation was higher than expected in March and remained in double digits, a level of persistent price increases that could mean further hikes in interest rates in the coming months despite a weak economy.
March consumer prices were 10.1% higher than a year earlier, a decline in the inflation rate from 10.4% in February, the U.K.'s statistics agency said Wednesday. That rate was higher than expected, with economists having forecast a drop to 9.8%. The core rate of inflation, which excludes volatile items such as energy and food, was unchanged at 6.2%.
ASML Beats Expectations but Uncertainty in Chips Sector Weighs on Stock
Shares in ASML Holding, a critical supplier to the global chip-making industry, were dropping Wednesday after the company said it sees "mixed signals" on demand despite improving profit and sales.
Dutch company ASML (ticker: ASML) supplies the 'lithography' machines that are essential for manufacturing semiconductors, with customers including Taiwan Semiconductor Manufacturing (TSM), Samsung Electronics (005930.Korea), and Intel (INTC).
Telecom Italia Says Network-Assets Suitors Submitted New Offers
Telecom Italia SpA said it has received two new nonbinding offers for its fixed-line network assets from a consortium formed by Italian state lender Cassa Depositi e Prestiti SpA and Macquarie Group Ltd., and from KKR & Co.
The Italian telecommunications company said late Tuesday that its board will consider the offers at a meeting scheduled for May 4.
Heineken Backs 2023 Guidance After 1Q Pricing-Driven Revenue Growth
Heineken NV backed its full-year guidance on Wednesday on the back of robust pricing and after reporting increased revenue for the first quarter.
The Dutch brewer said that the outlook for 2023 remains unchanged, with adjusted operating profit-the company's preferred metric, which strips out exceptional and other one-off items-expected to grow organically mid- to high-single-digit.
Just Eat Takeaway.com 1Q GTV Fell on Strong Comparatives; Raises 2023 Guidance
Just Eat Takeaway.com NV on Wednesday reported a 7.7% fall in gross transaction value for the first quarter of the year against strong comparatives, raised its full-year adjusted Ebitda forecast and launched a 150 million euro ($164.6 million) share buyback program.
The Amsterdam-headquartered food-delivery group said it expects adjusted earnings before interest, taxes, depreciation and amortization for 2023 to be EUR275 million compared with previous guidance of EUR225 million.
Glencore willing to consider improvements to Teck Resources proposal
Glencore PLC UK:GLEN said Wednesday that it would be prepared to consider improvements to its merger, demerger proposal for Teck Resources Ltd TECK. if its board were willing to engage with it, but would also be willing to go directly to its shareholders if not.
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04-19-23 0533ET
