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STOXX 600 up 0.2%
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Adidas leads after results
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Focus on NFP
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Wall St futures higher
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KEEPING A DEFENSIVE TILT (0936 GMT) Turmoil in the banking sector, particularly in the U.S., is having an impact on monetary policy. On Wednesday the Fed signalled it could be at the end of its tightening cycle, while the ECB on Thursday raised rates by 25 bps, its smallest hike since it started lifting rates last summer.
"The Fed's mention of "economic and financial developments" looks like a clear reference to the continuing turmoil in the US regional banking sector, and for now we think further hikes are off the table," Barclays equity strategists write.
However, they're not expecting easing any time soon, even as markets fully price a quarter-point cut as soon as September.
"Absent a quick drop in inflation, only a sharp weakening in growth (i.e. labour market), or a major financial accident, will prompt the Fed to deliver the expected rates cuts," they say. Barclays notes that equities have mostly been higher after the Fed stopped hiking rates, unless a recession unfolded quickly like in 1974 or 1980/81, and only dropped after the first rate cut.
On earnings, Barclays notes that results have continued to come in better than expected which have been "a relief for equity markets" and don't point to an imminent downturn. For now, Barclays says the path of least resistance for equities may be to the upside, but they still favour positioning defensively.
"Equities are in late-cycle limbo, torn between peak rates hope and recession fear," they write. "More cracks are showing, with more banking stress and sharply lower oil prices, so growth outlook does not get better... Hence a more defensive tilt still makes sense to us, with yields likely to be capped for now."
(Samuel Indyk)
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STOXX HIGHER, SET FOR WEEKLY LOSS (0744 GMT) Europe's STOXX 600 was eking out gains on Friday morning but was still set for a second straight weekly loss after rate hikes from the Fed and ECB and as concerns about the financial health of the U.S. continued to lurk in the background.
Still, Europe's banks seem relatively immune to the pain faced by their U.S. counterparts, and the STOXX banks index is up 1.7% on Friday, although still looks set to close the week in the red.
The STOXX 600 is up 0.3%, while Germany's DAX , France's CAC 40 and Britain's FTSE 100 are up between 0.4%-0.6%. Sportswear manufacturer Adidas tops the pan-European benchmark after upbeat quarterly earnings, and there have been differing fortunes for major airlines with British Airways owner IAG rising after results and Air-France KLM shares retreating.
Attention is now turning to today's U.S. labour market report, with job growth expected to slow but gains in average hourly earnings likely to remain strong.
Here's your opening snapshot:
(Samuel Indyk)
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EUROPE SET FOR HIGHER OPEN (0639 GMT) European futures are edging higher on Friday morning, a day after the ECB raised its key interest rates for the seventh consecutive meeting, with concerns about the state of the U.S. financial sector on pause as Apple earnings boosted sentiment.
The world's largest company by market cap surprised investors with a rise in iPhone sales even as the global smartphone market slumps. Its Frankfurt-listed shares are up 2.1% this morning.
Futures on the Euro STOXX 50 are up 0.4%, with Germany's DAX , France's CAC 40 and Britain's FTSE 100 futures all rising between 0.3%-0.4%.
Wall Street futures are also higher, while MSCI's broadest index of Asia-Pac shares ex-Japan is up 0.4%.
Key U.S. labour market data is in focus later for signs on whether previous tightening is starting to impact the economy. Nonfarm payrolls are expected to have increased by 180,000 last month, the smallest increase in nearly 2-1/2 years, although wage growth is expected to have remained strong, rising 0.3% on the month and 4.2% y/y, which may offer little comfort in the Fed's inflation fight.
(Samuel Indyk)
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GERMAN DATA IN THE REAR-VIEW MIRROR (0558 GMT)
The euro is digesting a widely anticipated hawkish quarter-point rate rise from the European Central Bank, and is off its one-year highs. While ECB President Christine Lagarde was clear more tightening will come, markets are paring back their expectations for further rate rises . Preoccupied with the ECB and tightening credit conditions in the region, investors are likely to riffle over a bunch of delayed March indicators in Germany - chiefly industrial orders and consumer goods, both of which have been volatile. In the background, there's also evidence that travellers from a reopened China flocked to Europe during their May Day break early this week.
Their luxury shopping has played no mean part in Europe's economies. An index of European
luxury retailers is up 30% this year and French luxury firm LVHM has
joined the league of top 10 global firms by value and become the first European firm to have a
market cap of more than $500 billion.
Swiss FX reserves are due too. The franc is at its strongest level in a couple of
years as concerns over U.S. banks drive cash into safe havens, meaning there's opportunity here
for the Swiss to recoup the reserves they lost to bond market volatility in 2022.
Speaking of the Swiss, UBS is reviewing options for Credit Suisse's Swiss
bank, including potentially keeping the unit's investment banking operations while selling the
rest, Reuters reported.
Non-farm payrolls data is the main thing on the watchlist during U.S. hours. Tightness in
the labour market is a given, so the questions are around how the Fed balances falling
unemployment with its need to see inflation trend lower.
Key developments that could influence markets on Friday:
Economic data: German March industrial orders, Swiss forex reserves, UK PMI, US non-farm
payrolls.
(Vidya Ranganathan)
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