MARKET wrappers
Watch for:
EU industrial production; Germany WPI; business updates from Siemens Energy, AXA, Vodacom Group
Opening call:
Stock futures are up slightly for European indexes. In Asia, equity benchmarks were mixed; the dollar fell slightly; Treasury yields were little changed; while oil and gold futures fell.
Equity:
European stocks look poised to start the week on a cautious note after posting gains on Friday.
US indexes fell on Friday, posting a second straight weekly loss, as concerns over regional banks persisted and survey data showed a rise in consumer inflation expectations.
Stock indexes have been stagnant recently, making little progress since late March after a strong start to the year driven by megacap tech companies like Apple and Microsoft. Concerns that turmoil in the banking sector could trigger a recession have soured the mood of many investors.
“The risk-reward tilt doesn’t look attractive to us, given everything there is to worry about: the lagged effects of Fed rate hikes, the unknown tightening of regional banking problems, the message you get from the curve of returns invested,” said David Lefkowitz, head of Americas equities at UBS Global Wealth Management. “I think there’s enough reason to put a higher-than-normal probability on a downside scenario.”
The congressional standoff over raising the U.S. debt ceiling is also weighing on markets, after a much-anticipated meeting scheduled for Friday between President Biden and congressional leaders was postponed until next week. The US government faces a significant risk of not being able to pay all of its bills in the first two weeks of June unless the debt ceiling is raised, according to the Congressional Budget Office.
“The ceiling on the debt ceiling is exactly what investors don’t need right now,” José Torres, senior economist at Interactive Brokers, wrote on Friday.
Beyond that, the outlook for the Federal Reserve’s monetary policy also looks unclear.
Fed Governor Michelle Bowman signaled early Friday that she was not on board because April’s consumer price index inflation data showed enough progress in reducing price pressures to warrant that the central bank keeps interest rates stable for the rest of the year. .
“In my view, the most recent CPI and employment reports have not provided consistent evidence that inflation is on a downward path, and I will continue to closely monitor incoming data as I consider the appropriate policy stance monetary policy at our June meeting,” Bowman said in a speech at a European Central Bank conference in Frankfurt.
“There’s a lot of uncertainty with these markets,” said Mark Arbeter, president of Arbeter Investments.
Forex:
The dollar fell slightly early Monday as traders assessed various signals. The Fed’s speakers have kept to their relatively buoyant message that their fight against inflation is far from over, said Alvin T. Tan, head of Asia currency strategy at RBC Capital Markets.
Meanwhile, elections in Thailand and Turkey over the weekend have drawn the attention of emerging market investors, Tan added.
Bonds:
Treasury yields were little changed in Asia early Monday.
The 2-month Treasury note saw volatile trading on Friday, returning its rate to 4.8% amid aggressive selling, after a meeting between President Joe Biden and congressional leaders on the debt ceiling
Wild swings in the 3-2-month bond rate on Friday suggested traders were somewhat uncertain about whether or how quickly a resolution might be reached. Friday’s bounce in the 2-month rate means investors and traders were selling the underlying Treasury bill, which matures after the time when the government is likely to run out of money.
Energy:
Crude oil futures fell in Asia. The price of the commodity could be pressured by concerns about whether demand growth will persist, ANZ said.
There has been a drop in purchases of Kazakhstan’s CPC Blend crude, which has been a mainstay for buyers in China and South Korea.
Meanwhile, supply risks continue to rise as Canada’s main oil-producing region of northwestern Alberta faces an increased risk of wildfires, ANZ said.
Metals:
Gold prices were slightly lower as a stronger US dollar pressured prices for the precious metal. However, analysts believe gold could continue to gain in the long term due to safe-haven demand.
“Gold just needs to survive this dollar rally and should benefit from continued safe haven flows as Wall Street worries about geopolitical stress, a debt ceiling impasse and potentially more banking problems regionals,” said Oanda senior market analyst Edward Moya.
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Copper fell amid negative sentiment. China’s uneven economic recovery has weighed on base metals market sentiment, ANZ said. Soft consumer inflation has raised concerns about weak demand in the country, despite physical indicators that demand has improved in recent months.
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Chinese iron ore futures rose amid growing risk-averse sentiment. “Overseas financial turmoil has not yet ended, while domestic economic recovery expectations have strengthened,” China Futures said.
However, China Futures remains cautious on demand for ferrous metals as the peak season has passed. He suggests staying neutral about the commodity.
TODAY’S MAIN HEADLINES
Investors are nervous and that could support stocks
Investors have a sour view of US stocks. The naysayers say it’s good news for the market.
Turbulence in the banking sector has dragged down fund managers’ enthusiasm for stocks through 2023, according to Bank of America’s most recent monthly survey. The stress comes on top of concerns about persistent inflation, higher interest rates and a slowing economy, which have led them to cut their bond holdings to the lowest levels relative to bonds since 2009
RIP, Lumber-Futures contract that jumped during Covid-19
The lumber futures contract that soared during the pandemic and heralded the Covid construction boom, broken supply chains and inflation will trade in its final session on Monday.
The long-standing barometer of lumber prices and construction activity is being phased out and replaced by a new lumber futures contract in an effort by stock market operator CME Group to boost trading.
G-7 leaders are expected to target Chinese “economic coercion”.
The US and its allies are poised to increase pressure on China at this week’s Group of Seven summit in Japan, with an expected joint statement rejecting the use of economic retaliation against nations over political and other disputes disagreements, according to people familiar with the situation.
The advance statement is not expected to mention any countries by name, the people said, but comes as concerns grow among the United States and its allies about Beijing’s growing use of what its critics call “economic coercion ” to show their displeasure with other countries.
Falling tax revenue speeds up debt ceiling deadline
Wall Street and Washington were rocked this month by government warnings that the US could become unable to pay all its bills as early as June 1. That crisis came months earlier than expected, raising the specter of a federal default unless Congress increases the debt. ceiling
The reason: The expected annual amount of tax season payments did not flood the Treasury. When the Congressional Budget Office analyzed tax collections for the current fiscal year through April, the number fell about $250 billion below predictions just a few months ago.
The 28-year-old LVMH heir who turns TAG Heuer into a billion-dollar brand
GENEVA-Among the many luxury brands that make up LVMH Moët Hennessy Louis Vuitton are top tier brands that generate more than $1 billion in annual revenue, driving the conglomerate’s business.
Frédéric Arnault, chief executive of TAG Heuer and the third son of LVMH’s top boss Bernard Arnault, said the Swiss watchmaker is about to join those ranks.
How sanctioned Western products still flow into Russia
BERLIN: A group of former Soviet republics has become a major transshipment hub for US and European computer chips, lasers and other products with civilian and military uses bound for Russia, according to Western officials and data compiled by The Wall Street Journal.
US and European Union exports of sensitive, so-called dual-use goods to countries in Russia’s neighborhood rose sharply in 2022. So did shipments of these goods to Russia, often by a similar multiple, a analysis of United Nations trade data. shows.
Rolls-Royce CEO Embarks on ‘Last Chance’ Review at Jet-Engine Maker
LONDON—The company that pioneered the commercial jet engine and now powers nearly half of the world’s largest airliners is embarking on its latest attempt to emerge from a decades-long crisis.
Tufan Erginbilgic, a former oil industry executive, took over as CEO of British engine maker Rolls-Royce Holdings in January. The company was recovering from the pandemic after suffering years of huge costs stemming from a troubled engine.
With $10 dresses and no online sales, this budget retailer is taking on America
Primark has become one of Europe’s fastest-growing retailers with a strategy almost unique among big fashion brands: avoiding online sales.
It is now planning a major expansion into the US.
Live from Twitter, it’s the Elon Musk Show. Next Up, a new CEO and Tucker Carlson.
When then-NBCUniversal head of advertising Linda Yaccarino recently asked Elon Musk about his Twitter tenure, she gave her candid assessment in front of a crowd.
“It’s entertaining,” said Mr. Musk at a marketers’ conference last month, one of many stops on an advertising tour that was supposed to appease Twitter’s advertisers. He then added, “Train crashes are definitely entertaining.”
(MORE TO FOLLOW) Dow Jones Newswires
May 15, 2023 00:17 ET (04:17 GMT)
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