MARKET WRAPS
Stocks:
European stocks traded mixed on Friday as earning season got underway, and as investors continued to digest U.S. data which further raised expectations of a Federal Reserve interest-rate pause.
"Today's only economic numbers of note are U.S. import and export prices for June, which are expected to reinforce the deflationary narrative of this week's data," CMC Markets said.
However, expectations for the Fed have decreased only marginally and the probability of a hike in two weeks is almost 90% according to the market, SEB said.
Over the weekend, the Fed will enter its quiet period ahead of the July 26 interest rate announcement.
Stocks to Watch
Commerzbank is expected to upgrade its net interest income guidance and set out a larger share buyback when it releases its second-quarter results, Deutsche Bank said, adding it continued to like the stock and reiterated its buy recommendation. Read more .
Glencore has been actively pursuing mergers and acquisitions recently, and while other major miners are expected to follow, the miner's aggressive approach should have the best pay off over time, Jefferies said. Read more .
SAP investors are likely to question the company's investments in artificial intelligence as more and more companies pour money into the technology, Jefferies said. Read more .
Economic Insight
Headline inflation should continue to ease in France as energy and food prices fall, Pantheon Macroeconomics said.
Overall inflation rose 4.5% in June in the eurozone's second-largest economy, slowing from the previous month thanks to lower energy and food inflation.
This should continue in the coming months as oil and natural-gas prices offer a favorable base effect, even in the event of a cold winter driving up energy demand, Pantheon said.
Read French Core Inflation Set to Ease, Slowly
U.S. Markets:
Stock futures were lower as investors awaited a batch of bank earnings.
Economic data will also be on tap, with import prices for June and preliminary consumer sentiment for July due.
Yields on government bonds rose, after sliding Thursday on waning interest-rate fears. The yield of the benchmark 10-year Treasury note rose to 3.798%, from 3.759%.
Stocks to Watch
U.S.-listed shares of Ericsson were tumbling 8.4% after the company reported second-quarter adjusted operating profit that fell 62% from a year earlier on a sharp decline in networking-equipment sales.
Roivant Sciences jumped 10% in premarket trading after The Wall Street Journal reported the company was in talks to sell an experimental drug for treatment of ulcerative colitis and Crohn's disease to Roche in a deal that could be valued at more than $7 billion.
Follow WSJ markets coverage here
Forex:
The euro and the pound could drop from overstretched levels against the dollar, ING said.
A bleak dollar outlook should limit falls, however, as weakening inflation dents U.S. interest-rate prospects, it said.
ING's models show EUR/USD--which earlier hit a 15-month high of 1.1245, according to FactSet--is around 2.0% overvalued, "a clear signal that the move has exceeded what can be explained by market factors," while sterling faces even clearer downside risks.
EUR/USD--which last trades at 1.1234--could fall towards 1.1170-80 "in the currently highly volatile environment," while GBP/USD could drop to 1.3050-70, ING added.
The dollar recovered modestly from sharp falls but the DXY dollar index still traded just below the key 100 level in early European trade.
"Today might represent the first test of whether the selloff against the dollar can take a break or whether it will continue," UniCredit said.
Read GBP/USD Likely to Extend Gains Toward 1.3335, Charts Show
Read Swedish Krona Resurfaces After Recent Sharp Losses
Bonds:
If a significant challenge to the European Central Bank terminal deposit rate pricing of 4% is absent, it will be difficult for 10-year Bund yields to remain above 2.5%, Barclays said.
"However, Bund yields did break out of the recent range to trade as high as 2.65% which we would argue was largely on account of global factors [U.S. Treasuries and gilts] rather than on the back of any domestic growth and inflation momentum," it said.
"Absent any fresh data shocks, the positive July seasonals could reinforce themselves here, keeping Bunds below 2.5%," Barclays added.
Read Long-Duration Bonds Seen Offering Good Risk-Reward
Energy:
Oil prices declined, but were set for their third weekly gain, as positive economic signals in the U.S. and supply challenges lifted prices.
Oil has broken out of its range as U.S. data has shown price pressures easing, boosting hopes that the Fed will be able to eventually halt its rate increases.
Russian oil exports have been trending lower while supply disruptions in both Libya and Nigeria have renewed concerns about a tightening oil market, ING said.
Metals:
Base metal prices slipped as weak demand from China continued to bite.
"For base metals, we expect prices will remain under pressure in response to the global economic slowdown and China's service-led recovery," BMI said.
However, LME inventories have recently fallen to 41,400 tons for copper and 273,000 tons for aluminum from year-to-date highs of 96,600 tons and 505,300 tons, respectively, BMI said.
"Expectations of more stimulus from the Mainland Chinese government present upside risks to base metal prices."
Gold
Gold prices are likely to find support in the medium term, with a peaking of interest rates and a softening of the dollar to act as a tailwind for the yellow metal, according to ANZ.
ANZ said "a pause in rate hikes by the Fed amid other more hawkish central banks should see the US dollar likely to weaken in the second half of this year".
As a result, ANZ said this should attract more buying of gold from central banks and also consumers in Asia.
"Further, the risk of a US recession is not completely off the table, which should attract haven fund flows into gold into 2024," it added.
DOW JONES NEWSPLUS
EMEA HEADLINES
Nokia and Ericsson shares tumble on profit warning, lackluster results driven by weak U.S. markets
Shares of Nokia Oyj and Ericsson AB tumbled on Friday after the mobile device and network equipment rivals dropped a warning and some lackluster results on investors amid struggles with weak North American markets.
Nokia NOK FI:NOKIA and Ericsson SE:ERIC.A SE:ERIC.B stock tumbled 9.4% and 8.8%, respectively, in in their respective Finnish and Swedish markets, as early trading in U.S.-listed shares tracked those steep drops.
Burberry Backs Full-Year Guidance as 1Q Retail Sales Met Views - Update
Burberry Group on Friday backed its full-year guidance after first-quarter comparable store sales rose 18% on a strong recovery in mainland China and matched market views, while revenue also grew.
The British luxury-good company said retail revenue rose to 589 million pounds ($773.8 million) for the quarter ended July 1 from GBP505 million in the same period in fiscal 2023.
Roivant in Talks to Sell Stomach Drug to Roche in Deal Valued at More Than $7 Billion
Roivant Sciences, a biotech company started by Republican presidential candidate Vivek Ramaswamy, is in talks to sell an experimental drug for a debilitating stomach disease to Roche Holding, in a deal that could be valued at more than $7 billion.
Sale of the drug, for conditions known as ulcerative colitis and Crohn's disease, could be announced in the coming days, according to people familiar with the matter. The talks could still fall apart and another suitor could swoop in, one of the people cautioned.
India to Buy French Rafale Jet Fighters, Submarines
India is planning to buy jet fighters and submarines from France, according to officials, in the latest sign of New Delhi gravitating further toward the West after the Ukraine war and sanctions on Moscow cut off the flow of Russian-made weapons.
A top Indian government panel headed by Defense Minister Rajnath Singh on Thursday approved the purchase of 26 Rafale jet fighters from France in a deal valued at around 520 billion rupees, equivalent to $6.3 billion. The panel also approved the purchase of three Franco-Spanish Scorpene-class submarines for around 270 billion rupees, an Indian official said.
GLOBAL NEWS
The Real Fed Debate This Month: What Would Prompt a Rate Hike This Fall
The outcome of the Federal Reserve's July meeting appears to be all but decided: Many officials signaled in recent speeches and interviews that they support a quarter-percentage-point increase that lifts interest rates to a 22-year high.
The real debate at the July 25-26 gathering is likely to center on what it would take to prompt another rate hike in September or in the fall. Inflation broadly slowed last month, raising the prospect that the July increase will be the Fed's final upward move in its inflation fight.
Fed's Waller, unimpressed by inflation data, calls for two more rate hikes this year
Federal Reserve Board Gov. Christopher Waller said Thursday he was not swayed by June's benign consumer inflation data, and said he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.
"I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target," Waller said in a speech to bond-market experts, known as The Money Marketeers of New York University.
If You Find the Economy Confusing, Don't Worry: It Is
I'm confused. Contradictory economic gauges are telling different stories, standard leading indicators are in question, and markets appear to be prepping for both boom and bust.
To be fair, confusion should be the default state for anyone trying to predict where the economy or markets are heading. Overconfidence and inflexibility spells doom for investors, and I'm rarely sure about what to do. Still, these are unusual times.
(MORE TO FOLLOW) Dow Jones Newswires
07-14-23 0633ET
