After the recent torrid stock delta/gamma-squeeze rally took a breather on Wednesday, overnight U.S. index futures resumed advancing even as yields jumped as investors continued to monitor rising inflation and the escalating situation in Ukraine. U.S. equity futures pointed higher after the S&P 500 closed 1.2% lower Wednesday: Emini S&P futures were up 0.65% or 28.75 to 4,476 while Nasdaq 100 futures were up 0.72% or 104 points.
The rally stumbled a bit moments ago when headlines hit that NATO was preparing for a potential incident…
- *U.S., NATO PREPARING FOR RISK OF RUSSIAN NUCLEAR INCIDENTS
- *U.S., NATO PREPARATIONS INCLUDE DETERRENCE POSTURES: OFFICIALS
… but promptly resumed the grind higher as algos decided that WW3 is bullish.
Europe’s Stoxx 600 Index fell 0.3%, erasing earlier gains as manufacturing data underscored the threat to economic growth from soaring raw material prices. Shares in Russia advanced as they partially resumed trading after being closed for almost a month. Treasuries declined, while oil fluctuated and the dollar gained. President Joe Biden is meeting NATO and G-7 allies in Brussels Thursday to discuss ways of pressuring Russian President Vladimir Putin into withdrawing his forces from Ukraine and ending the war, which has already lasted a month.
“Event risk is back today, with what should be a lively trading session,” said Peter Chatwell, head of multi-asset strategy at Mizuho. “The EU Council summit may bring a new round of sanctions against Russia, which would increase the upside pressure that energy markets are already under.”
In premarket trading, Spotify shares rose as analysts turned positive on the music streaming firm’s agreement with Alphabet’s Google to allow the company to bill users directly. Analysts said that the sign-up process should become more straightforward for Spotify users, while other companies like dating app operators could also benefit longer-term. KB Home shares declined in premarket after the homebuilder reported first-quarter results that missed the average analyst estimate, with analysts flagging lower deliveries and supply-chain disruption. Here are some other notable premarket movers:
- Nikola’s (NKLA US) shares rise 13% in U.S. premarket trading following the electric-vehicle maker’s Analyst Day, with JPMorgan analysts saying they had come away with a “positive impression” from the manufacturing site visit.
- Phunware (PHUN US) shares drop 8.7% in U.S. premarket trading after the software firm reports results late Wednesday, with the company’s net loss for the year widening to $53.5m in 2021 from $22.2m in 2020.
- Infinera (INFN US) rose 5% in extended trading after Rosenblatt Securities starts coverage of the communications equipment company with a buy rating and $12 price target, saying it’s the firm’s top pick in the optical systems space.
- Steelcase (SCS US) shares dropped in postmarket trading after the company warned that supply chain problems are persisting and projected fiscal 2023 EPS that was a penny short of the average analyst estimate at the midpoint.
- Traeger (COOK US) dropped 18% in extended trading after the grillmaker gives full-year forecasts for revenue and adjusted Ebitda that fall short of analysts’ projections. Peer Weber follows Traeger lower, declining 3.3% postmarket.
In Europe, the Stoxx 600 Index was slightly higher, with retail, financial services and real estate the worst performers while Russian stocks partially reopened after a record shutdown. European bourses were relatively flat at the open but saw bout of impetus amid above-forecast PMIs; however, this was short-lived. Here are some of the biggest European movers today:
- Bridgepoint shares rise as much as 28%, the most since the U.K. private equity firm listed last year, after FY earnings that analysts say topped expectations.
- Daimler Truck gains as much as 9.1% after reporting a forecast revenue for 2022 that beat the average analyst estimate. Daimler Truck outlook “still relatively bullish,” writes analyst Klas Bergelind (buy) in a note, with a market outlook for Trucks NA for “slight growth and for slight decline in Trucks Europe”
- Games Workshop jumps as much as 11%, the most intra-day since September 2020, after increasing its quarterly dividend. Jefferies analysts say they were “encouraged” by the level of dividend.
- Glencore shares drop as much as 3.8% after Qatar’s sovereign wealth fund sold 158.8m shares at a price of 497p, cashing in after strong commodity prices spurred a rally in the stock. The price represent a 2.8% discount to Wednesday’s close.
- Next shares drop as much as 4.4%, worst performer in the FTSE 100 Index, after the U.K. retailer lowered its profit and sales outlook for the year. RBC says Next cut its guidance because of the impact from Russia’s invasion of Ukraine, which is bigger than the broker had expected.
- L’Oreal shares fall as much as 2.4% after Jefferies cuts its recommendation to underperform from hold, citing downside risk to consensus estimates and to the stock’s valuation premium.
- Renault shares fell as much as 3.4% after the automaker said it is preparing for an exit from Russia amid mounting pressure on the French automaker to stop doing business in the country over its invasion of Ukraine.
The MOEX Russia Index rose more than 4% after Moscow Exchange resumed shortened four-hour trading in 33 out of 50 equities listed on the benchmark. Russian government intervention to prop up the stock market helped lift shares on the first day of trading since Feb. 28.
Earlier in the session, Asian equities snapped a two-day gain as China’s tech shares fell and investors assessed the risks from rising interest rates. The MSCI Asia Pacific Index declined as much as 1%, with the technology and communication services sectors weighing down the measure. Tencent was the biggest drag as its shares fell almost 6% after the gaming giant reported fourth-quarter results that missed earnings-per-share and revenue estimates. Tencent Declares ‘Reckless’ Tech Era Over as Growth Tanks This comes as Federal Reserve officials backed Chair Jerome Powell’s call for a 50-basis-point rate hike at the next meeting amid further increases in commodity prices. Benchmark indexes in Hong Kong and China were among the worst performers in Asia. “With most Fed board members appearing to back the 50-basis-point hike, a 50-basis-point hike no longer seems to be a minority opinion, which is dragging down stocks along with some profit-taking,” said Han Jiyoung, an analyst at Kiwoom Securities Co. in Seoul. Asian equities “will likely move in a range until more data and earnings releases in April,” Han said. The Straits Times Index was the biggest gainer in the region on Thursday as reopening stocks jumped after the Singapore government significantly eased Covid rules. Japan’s Topix rose for an eighth straight day. The MSCI Asia Pacific Index has climbed more than 1% since March 18 and is still on course for a second-straight week of gains. The resilience has confounded some analysts as the war in Ukraine and the hottest U.S. inflation in four decades threaten to undermine growth.
Japanese equities closed higher, erasing an earlier loss as the recent surge in oil cooled, providing some relief from concerns over commodities-led inflation. Automakers were the biggest boost to the Topix, which rose 0.1%, wiping out a morning drop of as much as 1.3%. Tokyo Electron and SoftBank were the biggest contributors to a 0.3% gain in the Nikkei 225. The yen fell 0.2% against the dollar, extending its recent decline. Global benchmark Brent crude swung between gains and losses near $121 a barrel, pausing its recent rally as investors weighed threats to supplies from the war in Ukraine.
India’s key equity gauges were little changed on Thursday as lenders extended losses as accelerating inflation hurt the growth outlook. The S&P BSE Sensex held at 57,672.06 as of 10:07 a.m. in Mumbai, while the NSE Nifty 50 Index was also little changed. All except three of the 19 sector sub-indexes compiled by BSE Ltd. rose, led by a gauge of metal companies, while consumer durables stocks were the worst performers. India imports about three fourths of its oil needs, with the more than 50% increase in the cost of Brent this year fanning inflation in the South Asian nation. Kotak Mahindra fell 2.8% and was among key decliners in Sensex after 1.6% of equity changed hands in a block deal. Of 30 shares in the Sensex index, 22 rose, while 7 fell.
In rates, treasuries resumed their slide, with the 10-year benchmark yield rising as much as 10 basis points to 2.39%. The inversion of parts of the yield curve point to a mounting risk of a growth downturn as surging commodities exacerbate Europe’s energy crisis. The belly of the Germany curve underperformed during the selloff: 10y Germany breaches 0.5%, CT10s richen 9bps, heading back toward 2.4%. Peripheral spreads tighten at the margin with short-end Portugal outperforming.
Investors have been dumping bonds as Federal Reserve officials warn steeper rate hikes may be necessary to subdue the hottest inflation in four decades. According to Pimco, that tightening cycle may end with the the Fed hoisting its key rate to 2.75% by the end of 2023 — despite distress signals from the bond market.
“We’ve been in a difficult situation we haven’t been in for a long time where you have an energy price shock,” Andrew Balls, CIO of global fixed income at Pacific Investment Management Co., said in an interview with Bloomberg TV. “That is negative for growth as it pushes inflation higher. It’s the first time in more than 20 years during a period of growth shock that we are not going to have a central bank providing a cushion because they have to focus on the inflation impact.”
Meanwhile, the European Central Bank said it will begin phasing out collateral-easing measures linked to the pandemic starting in July this year, while continuing to accept Greek bonds until the reinvestment period of its coronavirus bond-buying program ends.
In FX, the dollar advanced against most of its Group-of-10 peers as an increasingly hawkish tone among Federal Reserve officials boosted the currency’s yield appeal. Leveraged accounts snapped up USD/JPY after Japan’s 10-year yield rose to a level that last prompted the central bank to intervene in the debt market, traders said. “Speculation of Fed rate hikes continues to underpin strength in the dollar amid a series of hawkish comments from Fed officials,” said Shinsuke Kajita, chief strategist at Resona Holdings in Tokyo. “But, there’s some room for correction given the dollar looks overbought technically.” The Swiss franc was 0.3% lower after the SNB kep policy rates steady but warned it will intervene in currency markets if necessary. The Norwegian krone outperformed peers after the central bank raised its key policy rate 25bps to 0.75% as expected and flagged a faster pace of future rate hikes.
In commodities, European natural gas rises ahead of today’s European Council meeting to discuss Russian military aggression. WTI is little changed near $115. Base metals are mixed; LME lead falls 1.6% while LME nickel trades limit up. Spot gold is little changed at $1,946/oz. Bitcoin is firmer though off best levels after it briefly printed a new peak for the week at USD 43,488.
Looking at the day ahead now, and as mentioned there’ll be a number of summits taking place including between NATO leaders, G7 leaders and EU leaders. Otherwise, data releases include the flash PMIs for March from various countries, as well as the US weekly initial jobless claims, along with preliminary durable goods orders and core capital goods orders for February. Finally from central banks, we’ll hear from the Fed’s Kashkari, Waller, Evans and Bostic, the ECB’s Elderson and Schnabel, and the BoE’s Mann. In addition, the ECB will be publishing its Economic Bulletin.
- S&P 500 futures up 0.6% to 4,474.50
- STOXX Europe 600 up 0.2% to 455.05
- MXAP down 0.4% to 180.83
- MXAPJ down 0.5% to 588.79
- Nikkei up 0.3% to 28,110.39
- Topix up 0.1% to 1,981.56
- Hang Seng Index down 0.9% to 21,945.95
- Shanghai Composite down 0.6% to 3,250.26
- Sensex down 0.3% to 57,530.38
- Australia S&P/ASX 200 up 0.1% to 7,387.07
- Kospi down 0.2% to 2,729.66
- German 10Y yield little changed at 0.49%
- Euro little changed at $1.0996
- Brent Futures up 0.7% to $122.41/bbl
- Gold spot down 0.1% to $1,942.31
- U.S. Dollar Index up 0.11% to 98.74
Top Overnight News from Bloomberg
- Europe’s two largest economies are facing a sharp increase in price pressures along with new supply problems due to Russia’s invasion of Ukraine, with the impact expected to develop further in the coming months.
- Switzerland’s central bank refrained from sounding the alarm about the exchange rate despite the first breach of parity with the euro since 2015, as it warned that the war in Ukraine could hurt economic growth.
- Norges Bank raised its interest rate for the third time since the onset of the pandemic and flagged a faster timetable for future increases, just as NATO determines who will be the central bank chief to enact that tightening.
- Russian stocks gained after the sanctioned nation stepped in to halt the selloff in its equity market with a flurry of support measures as shares partially reopened following the record long shutdown.
- North Korea launched what appeared to be its first intercontinental ballistic missile in more than four years, as Kim Jong Un seeks to bolster his ability to strike across the Pacific and deter any U.S. attack.
A more detailed look at global markets courtesy of Newqsuawk
Top Asian News
- Sunac Said to Plan Meeting With Bond’s Holders on Extension Bid
- Brookfield Joins Morrison as Bidding for Uniti Heats Up
- China Envoy Says Xi-Putin Friendship Actually Does Have a Limit
- Prosecutors Charge SMBC Nikko, Staff With Market Manipulation
European bourses were relatively flat at the open but saw bout of impetus amid above-forecast PMIs; however, this was short-lived with bourses now negative, Euro Stoxx 50 -0.6%. US futures are in-fitting directionally but diverging in terms of magnitudes, posting gains of circa. 0.4% ahead of multiple risk events. Back to Europe, as the session progressing a defensive sectoral bias has become more pronounced.
Top European News
- NATO’s Stoltenberg Set to Stay, Confusing Norges Bank Future
- SNB Keeps Interest Rates Unchanged, Repeats Intervention Pledge
- Germany March Flash Manufacturing PMI 57.6; Est 56
- Germany March Flash Services PMI 55; Est 53.7
In FX, the DXY nudges closer to 99.000 as risk tone remains tentative and Treasuries return to bear flattening mode. Yen slides through remaining 2016 lows to 121.75, breaching option barriers on the way at 121.50. Euro gets some support from above forecast PMIs in stark contrast to Sterling, EUR/USD limits losses under 1.1000, as Cable lets go of 1.3200 and EUR/GBP eyes 0.8350 to the upside. Norwegian Krona derives traction via hawkish Norges Bank rate path and commentary from the Governor, but Franc finds little new in latest SNB Quarterly Policy Review; EUR/NOK sub-9.5000, USD/CHF back over 0.9300and EUR/CHF straddling 1.0250.
In Fixed Income, bonds back under siege after short-lived Wednesday revival. US Treasuries resume bear-steepening trend following scant positive reaction to a well covered and stop-through 20-year note sale. Gilts hand back more post-DMO remit recovery gains.
In commodities, WTI and Brent are modestly firmer but choppy in around UD 3.00/bbl ranges, ahead of multiple key meetings where energy will be a focal point. On this, Eurasia’s Rahman suggested, “The threshold for energy import bans is very high”, though the EU and US are reportedly close to a deal cutting Russian oil dependence. German coalition parties agreed all tax-paying employed people to receive on-off energy price allowance of EUR 300 as supplement to their homes, shut down of coal-fired power plants can be suspended, ideally continuing with a 2030 phase-out. Spot gold/silver are rangebound but picking up back towards overnight highs as broader equity performance continues to pull back. Finally, once again hit the 15% limit up mark following similar gains in China – with market contactsLME Nickel pointing to supply-disruption positioning.