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.
-
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.
-
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.
Write to singaporeeditors@dowjones.com
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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