EMEA Morning Briefing : Shares Set to Rise After Big Tech Earnings; Eyes on U.S. PCE Data

MARKET WRAPS

Watch For:

EU money supply in euro area; France consumer confidence survey; trading updates from Traton, TotalEnergies, Remy Cointreau, Autoliv, Saab, NatWest Group, Signify, SKF

Opening Call:

Shares could notch gains at opening trade in Europe on Friday. In Asia, stock benchmarks were mostly higher; Treasury yields mostly weakened; the dollar consolidated; while oil gained and gold was steady.

Equities:

European shares could recover some overnight losses on Friday, following strong earnings from Big Tech names Microsoft and Alphabet, although worries about slowing economic growth and sticky inflation could still weigh on sentiment.

Both stocks traded higher after the bell, following the release of their earnings.

Fresh U.S. data released Thursday morning held two bits of disappointing news for investors: U.S. economic growth slowed more than expected in the latest quarter, while inflation is proving stickier than many investors hoped.

This combination deflated hopes about the prospect of imminent interest-rate cuts.

"It's becoming difficult to justify rate cuts this year," said Invesco.

Forex:

The dollar consolidated in Asia, as traders bet the inflation component of the GDP data was a blip.

The latest snapshot of the U.S. economy showed slower economic growth and still-firm inflation.

Investors are now pricing in a 19% chance that the Fed will hold interest rates steady through year's end, according to CME Group, up from below 1% a month ago.

Bonds:

Treasury yields were mostly lower, following previous gains as U.S. data showed little room for interest rate cuts.

The 1Q GDP headline figure was a mild 1.6% expansion, but the data included signs that activity remains hot, including a 3.7% core PCE quarterly price index.

Weekly jobless claims declined, showing a resilient labor market.

March PCE inflation later in the day is expected to remain above the Fed's target.

Energy:

Oil rose in possible position-adjustment in Asia.

With no supply disruptions, however, the focus has shifted to increasingly bearish near-term fundamentals, Citi Research said.

Robust global oil inventory increases at almost 1.0 million barrels a day in the first quarter are stretching into April, and better-than-expected oil demand seen earlier this year is beginning to moderate, it said.

Metals:

Gold was trading steadily, as traders eye the U.S. PCE data due later in the day for further clues on the Fed's monetary policy path.

The daily technical chart is beginning to show some signs of strength in gold again, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Even if the precious metal doesn't decisively move higher this week, an ideal scenario would involve a bullish continuation pattern like a bull flag or triangle forming around recent levels, the analyst added.

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Copper rose, with investors "transfixed" by BHP's bid for Anglo American, Westpac said.

The almost-$39 billion all-stock bid from Australia BHP to buy its long-time rival would create the world's largest copper producer, it added.

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Iron ore fell, with markets now focused on China's industrial profit data, due over the weekend, and PMI data, which will be out next week, Westpac said.

Sentiment could also be affected by Chile and Brazil imposing tariffs on imports of steel from China, it added.

TODAY'S TOP HEADLINES

The Dream of Fed Rate Cuts Is Slipping Away

Thursday's report on economic activity delivered the latest in a series of rude awakenings to investors and Federal Reserve policymakers who have held their breath in anticipation that lower inflation would allow interest-rate cuts to begin in earnest this summer.

Instead, Commerce Department data showed that, for the third straight month, inflation was proving stickier than expected after an immaculate cooling in the second half of last year.

Mix of Slowing Growth, Firm Inflation Worries Investors

The latest snapshot of the U.S. economy rattled stock and bond markets with two bits of potentially disappointing data: slower economic growth and still-firm inflation.

Gross domestic product expanded at a 1.6% seasonally- and inflation-adjusted annual rate in the first quarter, the Commerce Department said Thursday, a pullback from last year's quick pace. That lagged behind the 2.4% projected by economists polled by The Wall Street Journal.

Trump Allies Draw Up Plans to Blunt Fed's Independence

WASHINGTON-Donald Trump's allies are quietly drafting proposals that would attempt to erode the Federal Reserve's independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank's authority.

Former Trump administration officials and other supporters of the presumptive GOP nominee have in recent months discussed a range of proposals, from incremental policy changes to a long-shot assertion that the president himself should play a role in setting interest rates. A small group of the president's allies-whose work is so secretive that even some prominent former Trump economic aides weren't aware of it-has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter.

U.K. Consumers Get Spring in Step as Confidence Mounts

Consumer confidence ticked a little higher in the U.K. this month, suggesting Britons are feeling more well-off as real incomes rise.

Research group GfK's consumer confidence barometer climbed to minus 19 in April from minus 21 in March, broadly in line with economists' expectations and marking the first uptick in sentiment since January.

Airbus Sticks to Plane-Delivery Goal, Ramps Up A350 Production

Airbus posted higher revenue and profit for the first quarter, backed its goal to deliver more planes this year than in 2023 and decided to increase production of its A350 wide-body jets, extending its lead over beleaguered rival Boeing.

The European plane maker confirmed its target to deliver about 800 commercial aircraft to customers this year, more than the 735 planes it dispatched in 2023.

Macron Warns Europe 'Can Die' Without Stronger Military, Economy

PARIS-French President Emmanuel Macron warned that Europe's decadeslong project of peaceful cooperation might perish if the continent doesn't shore up critical gaps in its architecture, from its economic underpinnings to its approach to defense and immigration.

Macron delivered the comments in what was billed as a sequel to the landmark address he gave at the Sorbonne University in Paris at the start of his first term. Seven years later-following a pandemic and the outbreak of wars in Ukraine and Gaza-Macron returned to the Sorbonne on Thursday with a foreboding message that cast Europe as a continent at a tipping point, buffeted by great-power rivalries between the U.S., China and Russia.

Google Sales Accelerate as Ad, Cloud Businesses Hold Up Amid Costly AI Push

Google's parent said quarterly profit jumped by more than half and announced its first cash dividend, sending its stock soaring following months of scrutiny over an expensive push in artificial intelligence.

Parent company Alphabet on Thursday also reported revenue in the three months through March rose 15% from a year earlier to $80.5 billion. That marked an uptick from the 13.5% rise in the previous quarter. The company highlighted cost controls that helped improve profit margins in the latest quarter.

Intel's earnings forecast fails to clear low bar, and the stock's drop continues

Intel Corp. shares dropped about 8% in the extended session Thursday, adding to their rough start to the year as the chip company reported revenue slightly below Wall Street's expectations.

The company forecast second-quarter 2024 revenue between $12.5 billion and $13.5 billion, and said it is expecting second-quarter adjusted earnings of 10 cents a share. Analysts tracked by FactSet had been modeling $13.6 billion and 25 cents, respectively.

Microsoft Earnings Jump on AI Demand

Microsoft's profit rose last quarter as artificial intelligence bolstered demand for its software and cloud services, prompting the company to spend billions on infrastructure needed to accommodate the booming appetite for the hot technology.

The tech giant's revenue increased 17% from a year earlier to $61.9 billion, beating analysts' estimates. Its net income grew 20% to $21.9 billion.

Meta Stock Had Its Worst Day in Years, Drop Shaved Billions Off Market Cap

Meta Platforms stock plunged and the company lost billions of dollars in value as investors rushed to sell shares on Thursday after the tech giant shocked investors with plans to spend even more aggressively on artificial intelligence.

Meta stock dropped 11% to $441.38 following the company's results late Wednesday, its largest decrease since Oct. 27, 2022. The company lost $132.2 billion in market capitalization, closing Thursday with a $1.12 trillion valuation.

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Expected Major Events for Friday

06:00/SWE: Mar Foreign trade

06:00/DEN: Mar Central Government Finance & Debt

06:00/NOR: Mar Retail Sales

06:30/HUN: Mar Employment & unemployment

06:45/FRA: Apr Consumer confidence survey

07:00/SPN: 1Q Economically Active Population Survey

07:00/SPN: Mar Retail Sales

07:00/SVK: Mar PPI

08:00/AUT: Apr Austria Manufacturing PMI

08:00/EU: Mar Monetary developments in the euro area (M3)

08:30/UK: Mar Monthly Insolvency statistics

08:30/UK: Mar Capital issuance statistics

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04-26-24 0018ET