UKX FTSE 100 Index

MARKET WRAPS

Watch For:

EU unemployment, flash estimate euro area inflation; Germany retail trade, foreign trade price indices, labor market statistics; France provisional CPI, PPI, household consumption expenditure in manufactured goods; Italy industrial turnover, provisional CPI, cities CPI; UK quarterly national accounts, balance of payments, business investment revised results, Nationwide house price index; no major corporate trading updates expected

Opening Call:

European shares may push higher on Friday as focus returns to inflation data. In Asia, stock benchmarks rose; the dollar steadied; Treasury yields were little changed; while oil fell and gold wavered.

Equities:

Stock futures point to slight gains in Europe at Friday's open, after U.S. stocks posted back-to-back gains as banking-sector fears eased and U.S. economic data bolstered hopes for a peak in interest rates.

"Another day without any unwelcome banking surprises lifted markets as investors headed back towards a risk-on approach," said Richard Hunter, head of markets at Interactive Investor.

Analysts also noted an improvement in market breadth, as cyclical sectors like industrials, materials and financials that have suffered in recent weeks have helped to push the market higher. Although the technology-heavy Nasdaq remained in the lead, benefiting from the perception of safety.

Boston Fed President Collins said Thursday the stress in the banking sector made it hard to know what was the appropriate interest-rate policy, but another one-quarter-percent rate hike seemed reasonable.

"I currently anticipate some modest additional policy tightening and then holding through the end of this year," Collins said, in a speech to a National Association for Business Economics conference.

However, Richmond Fed President Barkin saws a "pretty wide" range of possible outcomes for the interestpath of interest-rate given the uncertainty facing the outlook.

"Most forecasts of our policy path seem to average the risk of higher inflation with the risk of further contagion in banking," Barkin said in a speech to the Virginia Council of CEOs at the University of Richmond.

The U.S. personal consumption expenditures index for February is due today. The gauge is the Fed's preferred measure of consumer-price inflation, informing the central bank's efforts to drive inflation back to its 2% target.

Read: Stocks' Gains Are at Risk. It Isn't the Usual Yield-Curve Story.

Forex:

The U.S. dollar steadied in Asia as risk appetite has continued to recover, and investors have taken a round of hawkish comments from Fed officials in their stride, Commerzbank said. For today, market participants will likely focus on the February PCE deflator.

Meanwhile, Capital Economics thinks the dollar will make one final push higher as advanced economies fall into recession and risk sentiment deteriorates despite banking turmoil.

"Although the Fed may now be done with rate hikes, in most previous tightening cycles the dollar continued to appreciate even after short-term US interest rates peaked," Deputy Chief Markets Economist Jonas Goltermann said.

The U.S.-centric nature of the recent bout of financial system instability--which could mean the Fed eases much further and faster than other central banks--poses a risk.

But haven demand in a global downturn will likely dominate currency markets over the coming months, driving the dollar and yen higher near term, Goltermann said.

Bonds:

Treasury yields were little changed early Friday.

There's been a retreat from government bonds, and a move back into equities, as the First Citizens deal to buy most of the failed SVB Financial reduced concerns about deposit flight upending big banks.

This stabilization of the bank sector has put attention back on central bank efforts to fight inflation, with the U.S. February PCE price index due today.

"The worry I have is that policy is still not tight enough to completely tame inflation organically, but starting to get too tight to avoid accidents. Clearly if the accident is bad it can easily cause a big enough economic shock to make a big dent in lowering inflation," said Jim Reid, strategist at Deutsche Bank.

Energy:

Crude oil prices edged lower in Asia. Prices are likely to take cues from broader market sentiment, as ongoing supply-side issues remain in focus, said ANZ.

Oil producers including Norway's DNO ASA, Gulf Keystone Petroleum and HKN Energy have begun shutting wells in the Kurdistan region in Iraq after they lost access to a vital pipeline, ANZ added.

Metals:

Gold prices wavered early Friday. The price of the metal could remain below the $2,000/oz level as investors consider the path of Federal Reserve rate increases, said DailyFX.

Data releases such as the University of Michigan's monthly snapshot of U.S. consumer sentiment will have the potential to bear on interest-rate views, DailyFX added.

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Copper prices inched higher, sustaining a broad uptrend in recent sessions. Galaxy Futures analysts said they are observing a slight pullback in buying interest amongst downstream factories and traders, given the metal's currently elevated price levels.

But they reckon copper prices "are more likely to rise than decline" in the near term, due to ongoing supply tightness amid refinery maintenance and production suspension in several key producing countries.

"Before overseas supply issues are resolved, the market is likely to trade on expectations of destocking trends," the analysts said.

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Chinese iron-ore futures advanced, extending gains for a sixth session, boosted by strong demand as China's economy recovers from a slowdown due to pandemic restrictions.

China's official PMI for March remained in expansionary territory and showed strong recovery momentum, said Zhiwei Zhang, an economist at Pinpoint Asset Management.

Iron-ore consumption is supported by demand, but investors should still pay attention to potential regulatory risks, Huatai Futures said.

TODAY'S TOP HEADLINES

China's Factory Activity Expanded in March But at a Slower Pace

China's factory activity expanded at a slower pace in March while activity in the nation's service and construction sectors rebounded more strongly in the wake of the Covid-19 pandemic, according to official gauges released Friday.

The official manufacturing purchasing managers index declined to 51.9 in March from 52.6 in February, said the National Bureau of Statistics on Friday. The result beat the 51.3 forecast from a Wall Street Journal poll of economists.

White House Calls for Tougher Midsize Bank Rules

WASHINGTON-The White House on Thursday called for tougher rules for midsize banks after the collapse of two lenders earlier this month sent tremors through the banking system.

The recommendations call for new rules from the Federal Reserve and other banking regulators that would apply to banks with $100 billion to $250 billion in assets. There were approximately 20 firms in that asset range as of the end of 2022, according to the Federal Financial Institutions Examination Council.

Boston Fed's Susan Collins Sees Modest Further Tightening by Central Bank

Federal Reserve Bank of Boston President Susan Collins said she expects the U.S. central bank to tighten policy a bit more to bring down inflation before holding interest rates steady through the end of the year.

Recent stress in the financial sector has increased uncertainty about the direction of monetary policy, but the Fed must still address persistently high inflation, Ms. Collins added Thursday at a National Association for Business Economics conference in Washington.

Iraqi Oil-Pipeline Closure Supports Global Crude Prices

The closure of a vital oil pipeline in northern Iraq is bolstering international prices and threatens supplies in European countries hunting for alternatives to Russian crude.

Producers including Norway's DNO ASA, London-listed Gulf Keystone Petroleum Ltd. and Dallas-based HKN Energy Ltd. say they have either started to shut wells in semiautonomous Iraqi Kurdistan, or will soon do so if the blockage doesn't free up. They lost access to the pipeline after the federal Iraqi government said last weekend it had won a long-running arbitration case against Turkey over control of Kurdish crude exports.

Janet Yellen Says Bank Rules Might Have Become Too Loose

WASHINGTON-Treasury Secretary Janet Yellen said that regulators might need to tighten banking rules after the collapse of Silicon Valley Bank and Signature Bank, arguing that the recent turmoil is a sign that efforts to bolster the financial system are incomplete.

Speaking at an economics conference Thursday, Ms. Yellen questioned whether the regulatory system she helped build after the 2008 financial crisis was adequate to protect financial stability. Regulators this month extended emergency assistance to banks and stepped in to protect all depositors at SVB and Signature.

U.K. Joins Trans-Pacific Partnership as It Seeks to Diversify International Commerce

The U.K. government said it had struck a deal to join the Pacific trade alliance the U.S. exited under former President Donald Trump, as Britain looks to diversify trade away from Europe after Brexit.

The U.K. will become the first European country to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as the TPP. The club of 11 countries largely spans the Indo-Pacific region and includes nations such as Japan, Canada, Chile and Vietnam.

U.K. Plans to Invest $495 Million in Economic Crime Crackdown

The U.K. government said it would hire 475 financial crime investigators and change laws around corporate crime as part of a new plan to crack down on economic crime.

The three-year plan, unveiled Thursday, calls for new spending of GBP400 million, equivalent to $495 million, at several government agencies-GBP200 million of which will come from the government and GBP200 million from a levy on the private sector. The government will make a GBP100 million investment in data analytics and other technology to aid law enforcement.

Virgin Orbit Holdings to Cut Workforce by 85%

Virgin Orbit Holdings Inc. on Thursday said it reduced its headcount by about 675 employees, about 85% of its workforce, to reduce expenses as it has been unable to secure meaningful funding.

Shares nosedived 39% to 21 cents in after-hours trading.

Reporting on Russia Became More Treacherous After Ukraine Invasion

The Russian media landscape in which Wall Street Journal reporter Evan Gershkovich worked is far different and more dangerous than the one in which he and other Western journalists operated before last year's invasion of Ukraine.

Mr. Gershkovich has been detained since Wednesday by Russian authorities, who accuse him of espionage. His arrest, while on a reporting trip in the city of Yekaterinburg, around 800 miles east of Moscow, marks the first detention of an American journalist for allegations of spying since the Cold War. The Journal denied the allegations, and the Biden administration condemned the detention.

Wall Street Bonuses Fall by Most Since 2008

The average Wall Street bonus fell 26% last year, the biggest percentage drop since the financial crisis, as a slump in deal making cut into bankers' compensation.

Financial employees received average bonus checks of $176,000 last year, compared with a record high $240,000 a year earlier, the New York state comptroller's office said in a report Thursday. The annual report measures bonuses paid to employees in New York's securities industry and doesn't include base salaries, stock options or other forms of deferred compensation.

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Expected Major Events for Friday

04:30/NED: Feb Retail turnover

06:00/GER: Feb Foreign trade price indices

06:00/UK: 4Q Business investment revised results

06:00/UK: 4Q Balance of Payments

06:00/DEN: 4Q Revised GDP

06:00/UK: 4Q UK quarterly national accounts

06:00/GER: Feb Retail Trade

06:00/UK: Mar Nationwide House Price Index

06:30/HUN: Feb PPI

06:30/SWI: Feb Retail Sales

06:45/FRA: Feb PPI

06:45/FRA: Feb Household consumption expenditure in manufactured goods

06:45/FRA: Mar Provisional CPI

07:00/TUR: Feb Foreign Trade

07:30/EU: Mar EuroCOIN indicator of euro area economic activity

07:55/GER: Mar Labour market statistics (incl unemployment)

08:00/ITA: Jan Industrial turnover

09:00/LUX: Feb PPI

09:00/BEL: 4Q Balance of Payments

09:00/CRO: Feb Industrial Production Volume Index

09:00/CYP: Feb PPI

09:00/GRE: Jan Turnover Index in Retail Trade

09:00/ITA: Mar Provisional CPI

09:00/ITA: Mar Cities CPI

09:00/EU: Feb Unemployment

09:00/EU: Mar Flash Estimate euro area inflation

09:00/GRE: Feb Labour Force Survey

12:00/POL: 4Q Quarterly Balance of Payments

16:59/SPN: Feb Budget deficit

16:59/SPN: Jan Monthly Balance of Payments

16:59/SPN: Jan Budget deficit

16:59/SPN: Dec Budget deficit

16:59/BEL: Feb PPI

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(END) Dow Jones Newswires

March 31, 2023 00:21 ET (04:21 GMT)

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