MARKET WRAPS
Stocks:
European stocks were in the red on Tuesday as investors assessed data that showed Chinese exports cooled and prepared for reports on U.S. inflation both at the consumer and supplier levels later in the week.
Chinese exports rose 8.5% in April, faster than the 6% pace expected by economists polled by The Wall Street Journal but weaker than the 14.8% year-over-year jump recorded in March.
Tuesday's data also showed imports fell 7.9% in April from a year earlier, an unexpectedly weak result.
"...Lower Chinese imports is a bad sign for companies exporting to China. Maybe but just maybe, it could be time to slow down bets for further gains in French luxury brands, as the likes of LVMH, which had a stellar year, partly thanks to the returning Chinese demand?" Swissquote Bank said.
Read Chinese Exports Cool in Latest Warning Sign on Global Trade
Stocks to Watch
Intesa Sanpaolo's large retail franchise can reap the benefits of rising interest rates while taking advantage of a stronger-than expected macro-economic outlook, Deutsche Bank said, lifting its target price on the stock to EUR3.40 from EUR3.20.
Its strong liquidity and asset quality allows the Italian bank to "structurally reap the benefits" of a margin-driven acceleration of net interest income and ultra-low cost of risk.
In the first quarter, the bank's net interest income surged 66% on year to EUR3.25 billion while its cost of risk came to 17 basis points. It made EUR1.96 billion in net profit in the first three months of the year.
Economic Insight
U.K. annual house price growth slowed to 0.1% in April, leaving house prices largely flat on-year according to the latest Halifax data, suggesting some stability has returned to the housing market, OnTheMarket.com said.
After mortgage rates soared in autumn amid unprecedented market uncertainty, this is welcome news with buyer and seller sentiment resilient as the busier spring market kicks into gear, OnTheMarket.com added.
"While there may be another rise in interest rates this month and although inflation continues to exert pressure on household finances, there is an expectation that both are close to their peak, if not there already."
U.S. Markets:
Stock futures were lower as investors waited for another batch of earnings reports. Nikola, Plug Power and WeWork all give investor updates later on Tuesday.
Stocks on the move
Palantir Technologies rose 18% after posting a surprise profit in the first quarter and inching up revenue guidance for the fiscal year.
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PayPal fell 5% in premarket trading after reporting earnings late Monday. The company largely beat analysts' expectations but cut its outlook for annual adjusted operating margin.
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Forex:
The dollar was higher with the DXY up 0.2%, but remained at risk of turning lower as the market stands ready to price in further interest rate cuts by the Fed, ING said.
There are currently 68 basis points of rate cuts priced into the USD curve by year-end with three drivers set to influence further swings this week--U.S. banking developments, U.S. data including inflation on Wednesday and speeches from Fed officials, ING said.
"We favor a stabilisation around [DXY dollar index] 101.50, but a drop below 101.00 and a test of 100.00 are tangible possibilities in the near term."
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Sterling was slightly higher, with the market expecting at least two further interest rate rises by the Bank of England.
Commerzbank said the BOE will likely lift rates by 25 basis points on Thursday given elevated inflation but is unlikely to sound surprisingly restrictive about future policy due to concerns about past rate rises slowing the economy.
Therefore it sees "a certain potential for disappointment and thus the risk of a downside correction in sterling as the market's rate expectations seem quite ambitious."
Read BOE Could Begin to Cautiously Cut Rates in 4Q
Bonds:
DJE Kapital said, in general, the market is much more optimistic about interest-rate developments than the Federal Reserve.
Interest rates could remain high for longer than the market expects, it said, adding that for the time being, it continues to stick to a rather short duration bias.
"A lot seems to be priced in for 10-year U.S. government bonds...while the yield level of German 10-year Bunds appears relatively unattractive at 2.25%," it said, finding bonds with a maturity of two to four years more interesting.
Energy:
Oil futures were weaker in Europe after data showed China's imports slumped, but supply disruptions put a floor under prices.
Meantime, wildfires in Canada forced some of the nation's oil producers offline, adding some support to prices. The Alberta region where the fires are raging is Canada's biggest producer and has seen around 280,000 barrels of oil equivalent a day shut in.
Metals:
Gold edged higher on hopes for central bank buying, while base metals were mixed as the London Metal Exchange reopened following a public holiday.
Data showed China's central bank raised its gold holdings by around 9.1 tons in April, to 2,076 tons. Central banks have been large buyers of gold so far this year.
"The prospect of further central bank buying is also helping support the market," ANZ said.
DOW JONES NEWSPLUS
EMEA HEADLINES
UBS Refreshes Management Team to Integrate Credit Suisse
UBS said it would integrate Credit Suisse with a freshly composed executive team that includes Credit Suisse's chief executive and a new chief financial officer.
The Swiss banking giant said it is evaluating all options for Credit Suisse's Swiss business, which some politicians in the country want to be spun off into a separate unit or divested. The merger of the two banks is one of the largest ever by assets.
Saudi Aramco's Profit Slides as Oil Boom Cools
DUBAI-Saudi Arabia's national oil company posted a 19% drop in quarterly profit due to lower oil prices amid concerns over weakening global energy demand.
Saudi Arabian Oil Co., known as Aramco, said Tuesday that it made a net profit of 119.54 billion Saudi riyals, equivalent to roughly $31.88 billion, in the first three months of the year, down from $39.47 billion in the same period last year, when it benefited from soaring oil prices after Russia invaded Ukraine.
Deutsche Bank's U.K. deal may upend London investment-bank pecking order
Deutsche Bank's GBP410m acquisition of City broker Numis threatens to upend the pecking order in UK investment banking, as the German lender aggressively bolsters its dealmaking team following a three-year pullback.
On April 28, Deutsche DB XE:DBK gained 170 UK corporate clients and boosted its deals team from around 35 people to 155 investment bankers in one fell swoop. The combined powerhouse will be housed in Numis's UK:NUM London headquarters on Gresham Street.
Daimler Truck 1Q Net Profit Jumped on Improved Supply Chains, High Demand
Daimler Truck Holding said Tuesday that net profit soared in the first quarter of the year due to improved global supply chains and strong demand.
The German maker of commercial vehicles net profit jumped to 737 million euros ($811.1 million) in the quarter from EUR257 million a year earlier.
K+S Shares Drop After Cut to 2023 Guidance on Lower Potash Prices
Shares in K+S fell Tuesday after the German fertilizer company cut its outlook for 2023, warning that it expects prices in its agriculture segment to be tangibly lower for the year as a whole than they were in the first quarter.
At 0740 GMT, shares in K+S traded 5.5% lower at EUR16.86.
Fresenius Backs 2023 View; Sees Deconsolidation of Medical Care on Track
Fresenius on Tuesday backed its guidance for the full year and said the deconsolidation of its dialysis business Fresenius Medical Care is on track.
The German health-care company posted revenue for the first quarter totaling 10.23 billion euros ($11.26 billion), up from EUR9.72 billion in the same quarter a year prior.
Endesa Backs Full-Year Guidance After 1Q Net Profit Jumped
Endesa said Tuesday that net profit rose 76% in the first quarter of the year due to improving gross margin and earnings, and backed its guidance for the year.
The Spanish energy company said net profit jumped to 594 million euros ($653.7 million) in the quarter from EUR338 million in the same quarter in 2022.
VW Taps Bentley Executive to Fix Software Unit
BERLIN-Volkswagen Chief Executive Officer Oliver Blume named a company insider to head the automaker's struggling software unit as part of a broader overhaul of how the company develops the software for its cars, VW said on Monday.
Mr. Blume put Cariad, the unit, under review after taking up the job late last year. Set up by his predecessor, Cariad had struggled to deliver glitch-free software on schedule, causing VW to postpone the launch of several models across its brands.
GLOBAL NEWS
Chinese Exports Cool in Latest Warning Sign on Global Trade
SINGAPORE-Chinese export growth slowed in April as global trade cooled, underlining the importance of domestic spending as the main engine of the nation's economy after three years of strict Covid-19 controls.
Exports rose 8.5% in April from a year earlier, China's General Administration of Customs said Tuesday, faster than the 6% pace expected by economists polled by The Wall Street Journal but weaker than the 14.8% year-over-year jump recorded in March.
Yield Curve Control Will End if Stable 2% Inflation Reached, BOJ Gov. Says
TOKYO-Bank of Japan Gov. Kazuo Ueda said Tuesday the central bank would start unwinding its monetary easing once the nation sees sustainable and stable 2% inflation.
"If the bank reaches a view that 2% inflation can be achieved in a sustainable and stable manner, the bank will end [its yield curve control policy] and start shrinking its balance sheet," Mr. Ueda said to a parliamentary committee.
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05-09-23 0542ET
