MARKET WRAPS

Stocks:

European stocks made modest gains on Thursday with the mood buoyed by recent economic data and some positive corporate news.

Read Shell Shares Rise on Solid 1Q Guidance

Investor focus turned to the U.S. labour market for signs of a cooling economy, with non-farm payrolls data due Friday.

"The next few days will be key for whether we could see another 25bps rate rise from the Fed in May. A soft jobs report tomorrow, along with a weak CPI print next week could call time on the prospect of another 25bps hike at the next meeting," CMC Markets said.

Read Markets Seen Overpricing Fed Rate Cuts

Read Market Expectations on ECB, Fed Peak Rates Are Stable

Stocks to Watch

The earnings contribution from Rio Tinto's operations outside of its lucrative Australian iron-ore business is likely to rise sharply in the next three years, and should by 2025 more than offset softening iron-ore earnings, Citi said.

Underlying earnings from Rio Tinto's businesses beyond its Pilbara iron-ore division, which include copper and aluminum operations, were "a low" US$1.3 billion in 2H 2022, Citi added.

Citi expects that will rise to roughly US$4 billion in 2H 2025.

"While a Pilbara turnaround will be ongoing, we won't see it in RIO earnings contribution given declining iron-ore prices forecast."

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Volkswagen's ambitious volume growth and widening competitive gap should give investors pause, Bernstein said.

The German car company's 15% volume growth target, while achievable if its luxury segment performs well, is perhaps too ambitious too soon, Bernstein said.

"Given the tactical set-up we do not want to own Volkswagen right now."

The car maker is falling behind competitors in the battery-electric-vehicle realm and might require more investment in platforms and software-having already bet on in-house software group Cariad, which has yet to deliver significant returns, Bernstein said.

A strategic reorientation, which the analysts think will be outlined at an investor event on June 21, provides a silver lining, it added.

U.S. Markets:

Stock futures wavered ahead of the jobs report that follows other data this week suggesting the labor market is weakening.

Trading volume could be thin ahead of Friday's closure of equity markets. Bond traders will see an abbreviated session Friday, but will still be able to trade following the release of the jobs report.

Stocks to Watch

AbbVie dropped 1.5% before the market opened after the drugmaker lowered its profit outlook.

Costco reported a monthly drop in same-store sales of 1.1%, the first decrease by that measure since 2020. Shares were down 2.4% in premarket trading.

Western Alliance stock was up marginally premarket after shares dropped 12% Wednesday when it disclosed a plunge in deposits in the final weeks of March.

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Forex:

Poor investor risk appetite is limiting the euro's appreciation potential against the dollar even as interest rate differentials move in the exchange rate's favor, ING said.

EUR/USD reversed sharply from its high of 1.0970 on Wednesday despite an 11 basis points drop in short-dated U.S. yields following weaker U.S. data, ING added.

"The two-year differential between EUR and USD swap rates is moving back toward the narrowest levels seen in early March."

Wednesday's price action "tentatively confirms our thinking for EUR/USD over this next quarter," ING said.

Despite building macroeconomic negatives for the dollar, a challenging risk environment may keep EUR/USD bouncing around a 1.05-1.10 range, ING said.

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The dollar didn't fall too much following this week's ADP and ISM services data, which might indicate investors are waiting for the March job report before taking further positions in the currency, UniCredit Research said.

"The tame dollar reaction might hide the fact that investors have already started to pair positions ahead of the Easter break, but it might also indicate that markets have become accustomed to weaker data releases in the U.S.," UniCredit Research said, adding that position-paring ahead of the Easter holidays will probably continue Thursday.

Bonds:

Eurozone government bond yields rose in pre-Easter trade after better-than-expected German industrial order and production data were released on Wednesday and Thursday, respectively, even as growth fears remain, analysts said.

"The figures published yesterday on new orders in the manufacturing sector for the month of February are a clearly positive ray of hope," Metzler said.

Read UK Gilt Yields Could Fall as Impact of BOE Rate Rises Emerge

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The spreads of eurozone government bonds versus German Bunds have stabilized recently slightly above the levels of the beginning of March, DZ Bank said.

"While Bund spreads in the semi-core tightened moderately in the past two weeks, [spreads] on French OATs were slightly wider in view of the protests in the wake of the pension reform."

Energy:

Crude futures edged lower after weaker U.S. economic data looked set to halt a five-session run of gains for oil.

"Crude oil's rally paused as it battled the headwinds created by the weak economic data," ANZ said.

Despite the pause, oil is on course to end the week up 6% after a group of Saudi-led oil producers slashed production levels.

Metals:

Base metals were higher but gold dipped in early trade, as more bullish economic data from China was counterbalanced by worries over the health of Western economies.

"The macro environment is sending mixed signals for commodity money flows," Peak Trading Research said.

Data showed China's services PMI rose to its highest level in two years but that's as "forward-looking inflation expectations have softened after U.S. job openings dropped to two-year lows, McDonald's announced layoffs, and the ADP numbers came in soft."

Friday's jobs number will affect the dollar and risk assets next week, Peak Trading added.

Iron Ore

Iron-ore prices continue to slip because of both demand concerns and policy-maker intervention, Commonwealth Bank of Australia said.

China's NDRC has led the charge this year "to crack down on misinformation, hoarding and malicious speculation that typically result in higher iron-ore prices," including this week urging companies not to exaggerate price increases, CBA said. That is a weight on prices at a time when patchy China macro data is signaling an uneven economic recovery there.

CBA tipped a fall to $100/ton by later this year, projecting a cooling in Chinese steel demand.

DOW JONES NEWSPLUS


EMEA HEADLINES

Shell Sees 1Q Integrated Gas Production Rising, With Higher LNG Volumes

Shell PLC on Thursday forecast improved production from its integrated gas-and-oil products division in the first quarter of 2023, with higher liquid natural gas liquefaction volumes.

The oil-and-gas company said it expects integrated gas production of between 930,000 and 970,000 barrels of oil equivalent a day, up from 917,000 in the fourth quarter of 2022. Liquid natural gas liquefaction volumes are expected to improve to 7.0 million-7.4 million from 6.8 million, on higher uptime at Prelude and QGC in Australia.


German Industrial Production Rose for Second Straight Month in February

Industrial production in Germany increased in February for a second consecutive month, suggesting resilience midway through the first quarter as supply-chain bottlenecks ease and energy prices normalize.

Industrial output-comprising production in manufacturing, energy and construction-rose 2.0% in February compared with the previous month on a price, seasonally and calendar adjusted basis, easing from revised 3.7% increase in January, data from the German statistics office Destatis showed Thursday.


TUI AG Has Seen Strong Easter Holiday Demand at 95% of Capacity

TUI AG said Thursday that it has experienced strong Easter holiday demand, with around 95% of capacity and broadly in line with pre-Covid levels.

The London-listed German travel operator said it has over 500,000 customers holidaying with the company over the Easter break and expects a good summer this year.


SAS Begins Process to Raise Equity; Lifts Long-Term Profit Forecast

SAS AB said Thursday that it has begun the previously planned process to raise equity, and lifted its longer-term earnings forecast due to an expected increase in demand and capacity with lower financing costs.

The Scandinavian airline filed for Chapter 11 bankruptcy in July as it seeks to push through a comprehensive financial restructuring to cut costs and raise capital under the supervision of the U.S. court system.


Saudi, Iranian Foreign Ministers Agree to Resume Flights After Beijing Meeting

RIYADH, Saudi Arabia-Saudi Arabia and Iran agreed to restore flights between their countries and resume government and private-sector visits, after their top diplomats met in Beijing on Thursday as a thaw begins in one of the Middle East's thorniest rivalries.

The summit comes weeks after the two governments agreed to re-establish diplomatic relations in a deal brokered by China, which ended seven years of estrangement and jolted the geopolitics of this oil-rich region.


U.S., European Police Shut Down Hacker Marketplace, Make 119 Arrests

The U.S., Europol and police in 14 countries seized the infrastructure of a suspected Russian marketplace that claimed access to 80 million stolen banking, social media and email accounts for sale to hackers seeking to break into companies and government offices worldwide, senior Justice Department officials said Wednesday.

The international action conducted Tuesday and Wednesday against Genesis Market, one of the largest so-called initial access brokers in the world, resulted in 119 arrests. They were mainly buyers of identity data compiled for gaining access to computer systems to deploy ransomware, commit fraud and conduct other criminal activity, the officials said.


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