EUROPEAN EQUITIES LOOK "RATHER TOPPISH" (0915 GMT) It's been a relatively benign week for European equities, with the STOXX 600 little changed after hitting a 14-month high on Tuesday.
Earnings season kicks into gear next week, with 121 companies in the pan-European benchmark set to report quarterly results.
The smattering of company reports this week "don't really move the needle", according to Barclays equity strategists, who say the rally over recent weeks leaves the STOXX 600 close to their year-end fair value and looking "rather toppish". "Early Q1 earnings look okay, although owing to few reportees thus far, numbers are volatile," say Barclays equity strategists, led by Emmanuel Cau, in a note.
"However, more than the results themselves, investors will watch out for signs of weakening demand, lower orders intake and margins pressure," they say. Cau and co. say the calmer rates market and resilient earnings can maintain the current status quo and push up equities further, but are still cautious on the outlook, given the Fed's monetary policy uncertainty.
"If activity stays resilient, the front end of the curve is likely to continue recovering from last month's banking stress and move more back in line with consensus/Fed dots," Barclays says.
"However, if data show activity is softening materially, lower rates expectations could be reinforced, but we doubt it will be cheered by equities." Looking forward, Barclays identifies that the period between the last Fed rate hike and first rate cut is somewhat in "limbo" for equities, but they ultimately fall most of the time after the Fed starts cutting, before eventually finding a sustainable trough when growth stabilises.
(Samuel Indyk)
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EUROPEAN SHARES MIXED, SET TO END THE WEEK LITTLE CHANGED (0755 GMT) Europe's major stock indexes are mixed in early trade on Friday, hovering either side of flat, with the main benchmarks set also to end the week little changed.
The pan-European STOXX 600 is down 0.1%. For the week, the index has gained 0.03%. Britain's FTSE 100 is up 0.1%, Germany's DAX is down 0.2% and France's CAC 40 is up 0.1%, within touching distance of its all-time high reached earlier this week. EssilorLuxottica tops the European benchmark after the maker of Ray-Ban sunglasses reported strong sales growth on a rebound in Chinese demand. Miners are the biggest laggards, falling 2.4%, while defensive sectors such as healthcare and utilities are performing best.
Here's your opening snapshot:
(Samuel Indyk)
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EUROPEAN FUTURES FLAT, PMIS IN VIEW (0630 GMT) European stock futures are little changed heading towards Friday's open, with key data on economic activity set to draw attention.
Euro area and UK composite PMIs are expected to show both economies picked up in April, although the flash manufacturing indexes for the two are expected to remain in contraction. Euro STOXX 50 futures are up 0.07%, while futures on the DAX , CAC 40 and FTSE 100 are all little changed. Wall Street futures are a touch lower and MSCI's broadest index of Asia-Pac shares outside Japan is down around 0.9%.
(Samuel Indyk)
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PURCHASING MANAGERS OF THE WORLD, DIVERGE (0552 GMT) A month-long risky-asset rally, in the absence of any further banks collapsing, seems to be running out of steam as economic data offers few excuses for confidence. Softening second-tier data in the U.S. on Thursday put a bid under bonds for the first time in a few weeks, while bitcoin was clobbered. Purchasing manager's index data are the next set of economic figures due as market focus flings back on growth. British and euro zone manufacturing surveys are seen stuck in contraction territory. China posted stonking export growth in March, but surprised analysts think that's a one-off. Chinese manufacturing, which can be a leading indicator for Europe and elsewhere, is slowing. Export orders out of tech bellwether Taiwan have nose-dived. It's a different story on the services side, where robust readings have been taken as signs of strong demand, inflationary pressure and another reason to take interest rates higher. European and British services PMIs are seen steady and staying in expansion mode. British retail sales are expected to fall, adding up to a somewhat confounding picture. Asian markets were in caution mode through Friday, and MSCI's Asia ex-Japan index headed for its worst week since Silicon Valley Bank failed six weeks ago. Japan itself is looking interesting, with the Nikkei an outlier and hitting an eight-month high as it rides a wave of investor hopes that the world's third-biggest stock market might be in the process of awakening from decades of slumber. Japanese core inflation also hit its highest since 1981 and has pressure on the central bank to pare back its ultra easy policies. The Bank of Japan meets next week. Key developments that could influence markets on Friday: Data: Eurozone, UK and U.S. PMIs, British retail sales Speakers: Fed's Cook, ECB's de Guindos Earnings: Proctor and Gamble, Regions Financial, Schlumberger
(Tom Westbrook)
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