Employment Report for April; Canada Labour Force Survey for April; Enbridge results
Stock futures slipped Friday, putting major indexes on track to extend losses after one of Wall Street’s worst selloffs since the pandemic began.
Stocks have been whipsawed in recent days as investors have tried to gauge what impact the Federal Reserve’s plan to raise interest rates will have on the economy. Investors are caught between competing hopes: that rate increases will be significant enough to tame rapidly rising inflation, but not so large that they will derail economic growth.
“The market is trying to balance whether central banks are more worried about inflation or about dampening growth and the market has clearly decided they are more worried about inflation,” said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors.
“If the Fed is going to be fighting inflation at all costs then it will certainly have an impact on stocks.”
Overseas, benchmark indexes in both Asia and Europe retreated, with declines most pronounced for the tech-heavy Hang Seng Index, which slumped 3.7%. In mainland China, the Shanghai Composite Index fell 2.2%. In Europe, the pan-continental Stoxx Europe 600 fell 1%.
Valuations for U.S. markets have “moved from rich to very rich” in the past 10 years as stock prices have risen more than earnings, said Frank Benzimra, head of Asia equity strategy at Société Générale. But as interest rates climb, the value that investors place on companies’ future cash flows is decreasing, he said.
In addition, Benzimra said, some big technology companies depend on discretionary spending by consumers and on advertising — making them vulnerable to cyclical shifts in the consumer economy.
Investors were awaiting data on the state of the jobs market, a strong point for the U.S. economy with the unemployment rate close to a 50-year low. That has also driven wages higher adding to building inflationary pressures. The April jobs report, due at 8:30 a.m. ET, is expected to show another strong month for job gains.
The DXY Dollar Index hit its highest level since late 2002 in European trading, with ING saying upgrades to inflation forecasts alongside downgrades to growth estimates are a “dominant global theme,” one highlighted by the BOE, which is bad for risky assets and yet another boon for the dollar.
“Nowhere was that clearer than in the U.K., where the Bank of England forecast a U.K. contraction in 2023 and revised the 2022 peak in inflation,” said ING.
While the BOE may not raise rates as much as the market expects, the Fed’s tightening cycle is “rock solid” as U.S. inflation is more domestically generated, ING added.
Crude futures edged higher in Europe as investors continued to assess the possible impact of an EU embargo on Russia’s oil imports.
The impact of the EU’s plan to ban Russian oil hinges on whether sanctions also target shipping and insurance and how easily Russia can reroute its supplies elsewhere, said Fitch.
“The EU and its allies, including the U.S., South Korea and Japan, account for around two-thirds of Russia’s current crude and refined fuels exports and buyers in these markets will be hard to replace.”
Fitch has forecast Brent to average $100 a barrel this year, but said risks to its forecast are to the upside.
Gold and copper prices were steady in Europe, with sentiment held back by mixed macro signals.
Weak fundamentals have been pushing prices for both metals down in recent weeks, largely on rising inflation rates and China’s Covid-19 lockdowns.
But the Fed’s rate hike has managed to steady prices since then, given both metals are often used as indicators of economic health.
“Attention remains on China, where officials are struggling to contain a wave of Covid-19 by increasing restrictions in Shanghai and Beijing,” said ANZ Research.
TODAY’S TOP HEADLINES
Bausch + Lomb Prices IPO at $18 a Share, Below Expectations
Bausch + Lomb Corp. priced its IPO at $18 a share Thursday, falling short of expectations as it became the first big company in months to try going public into a turbulent stock market.
Bausch Health Cos., the parent company, raised $630 million in the offering. It had been aiming to raise as much as $840 million and sell the stock at $21 to $24 a share, according to a regulatory filing. The Wall Street Journal had previously reported the deal was likely to price at the low end or below the range.
News Corp Revenue Boosted by Gains in Dow Jones and Real-Estate Units
News Corp said revenue and segment earnings rose in the March quarter, driven by gains in its Dow Jones and digital real-estate units.
The New York-based media company, which owns The Wall Street Journal, HarperCollins Publishers and news organizations in the U.K. and Australia, reported revenue of $2.5 billion, up 7% from the year-earlier period. Segment earnings, which exclude interest, taxes, depreciation, amortization, impairment and restructuring charges, among other items, rose 20%.
EV Startup Lucid to Raise Vehicle Prices, Even as Losses Narrow
Electric car maker Lucid Group Inc. reported narrower losses in the first quarter of 2022, and said it would increase vehicle prices starting in June, citing a changing environment from when it first set pricing in September 2020.
Lucid said Thursday that it recorded a net loss of $81.3 million in the January-to-March period, compared with a $2.9 billion loss in the same year-ago period. The company stuck with its production outlook of 12,000 to 14,000 vehicles in 2022, a forecast it reduced earlier this year citing supply-chain disruptions and trouble getting parts such as glass and carpet. Lucid said it continues to face logistics challenges, citing factory shutdowns in China related to Covid-19.
IAG 1Q Operating Loss Narrowed But Missed Consensus
International Consolidated Airlines Group SA reported Friday a narrowed operating loss for the first quarter that missed consensus guidance, but said it expects its operating result to be profitable from the second quarter onward.
The company–which houses British Airways, Iberia, and Vueling among others–said its operating loss was 731 million euros ($770.6 million) compared with an operating loss of EUR1.08 billion for the first quarter of 2021.
Adidas Cuts Margin Target as It Warns of Falling Sales in China
Adidas AG on Friday set out a much less optimistic view on its prospects in Greater China this year, newly forecasting a fall in sales in the key market as pandemic-related lockdowns strangle demand.
Falling China sales means the German sportswear giant now expects no expansion in its margins this year.
German Industrial Output Fell More Sharply Than Expected in March
German industrial production fell sharply in March due to an intensification in supply-chain problems and higher input prices.
Total industrial output–comprising production in manufacturing, energy and construction–fell 3.9% in March compared with the previous month in calendar-adjusted terms, statistics office Destatis said Friday. Economists polled by The Wall Street Journal had forecast a 1.0% decline.
Russia Steps Up Attacks on Ukraine Railways, Other Infrastructure
Russia is intensifying strikes on Ukrainian infrastructure, seeking to disrupt deliveries of Western weapons as Moscow’s offensive in the east appears to have stalled.
Ukraine’s state railway operator said Thursday that 46 passenger trains were delayed by up to 11 hours because of damage from the Russian attacks.
DOJ to Resume Push for Polluters to Fund Environmental Projects
WASHINGTON-The Justice Department on Thursday said it would resume the practice of seeking money from polluting companies for projects in poor or minority communities, reversing a Trump-era policy.
The department, working with the Environmental Protection Agency, issued a rule reviving legal settlements, known as Supplemental Environmental Projects, that require companies accused of breaking pollution laws to pay for water wells, parks, or other environmental or community improvements.
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Economic Indicators (ET):
0830 Mar Stocks of Canadian grain at March 31
0830 Apr Labour Force Survey
1000 Apr Ivey Purchasing Managers Index
Stocks to Watch:
Bausch + Lomb Prices IPO of 35 Million Common Shrs at a Public Offering Price of $18.00 Per Shr; Shares Expected to Begin Trading on the NYSE and When Issued Basis on the TSX on May 6, 2022.
Read: Bausch + Lomb Prices IPO at $18 a Share, Below Expectations
Chartwell Retirement 1Q Loss C$3.32M
Chorus Aviation 1Q EPS C$0.13; Net C$22.9M; Rev C$342.4M
Galiano Gold 1Q Loss/Shr 1c; 1Q Loss $1.5M; Gold Production of 42,343 Ounces, in Line With 2022 Production Guidance of 100,000-120,000 Ounces of Gold
Genesis Land 1Q Loss/Shr C$0.01; Loss C$496,000; Rev C$20.4M
IGM Financial 1Q EPS C$0.91; Net C$220.2M; Rev C$641.2M
Kolibri Global Energy 1Q Rev $5.55M Vs. $3.27M; Loss/Shr $0.01 Vs. EPS $0.00; 1Q Net Revenue Increased 70% Due to Higher Average Prices and Production
Lucara Diamond 1Q Rev $68.2M; EPS 4c; Net $19M
Surge Energy 1Q Loss C$21.9M
WildBrain 3Q EPS C$0.12; Rev C$129.5M; Sees FY22 Rev C$480M-C$500M
Expected Major Events for Friday
06:00/RUS: Apr Russian Services PMI
06:00/GER: Mar Industrial Production Index
06:00/UK: Apr Halifax House Price Index
06:45/FRA: 1Q Flash estimate of job creation
08:00/ITA: Mar Retail Sales
08:30/UK: Apr S&P Global / CIPS UK Construction PMI
12:30/CAN: Mar Stocks of Canadian grain at March 31
12:30/CAN: Apr Labour Force Survey
12:30/US: Apr U.S. Employment Report
(MORE TO FOLLOW) Dow Jones Newswires