EUROPEAN EQUITY OPEN: Tentative start ahead of today's key releases, which include US CPI, FOMC meeting minutes, a BoC rate decision, and earnings from LVMH (MC FP)

OVERNIGHT: On Wall Street, stocks were choppy and within tight ranges on Tuesday, with a tentative tone ahead of Wednesday's CPI and FOMC minutes (full US market wrap is here). APAC stocks were mixed after the Wall Street lead (our APAC wrap can be found in the European opening news note here); Sino-US tensions continue to manifest: in late APAC trade, it was reported that China's Commerce Ministry started an investigation into Taiwan's restrictive trade measures on the mainland, and would be looking into measures on the imports of Chinese farm products, minerals, chemicals and textiles. Additionally, it was reported that China plans to impose a no-fly zone north of Taiwan between April 16-18th, action which follows recent military drills by China around Taiwan in response to meetings between high-level US and Taiwan officials.

EUROPEAN OPEN: The tone of overnight trading was tentative ahead of today’s session which is packed full of risk events, and tensions between China and Taiwan (see above) injected further caution, albeit the downside was limited and shortlived. European equities opened mixed. While today's main events are mostly focussed on North America (US CPI, FOMC minutes, BoC rate decision - previews for all can be accessed in the Day Ahead section, below), they have the potential to influence the global macro narrative for the weeks ahead of the May 3rd Fed meeting, where the base case is now for a +25bps rate rise; traders have also been paring back bets of Fed rate cuts through this year, and that has had a knock-on impact of adding some hawkishness into expectations for the ECB's own rate trajectory this year too. Overnight, ECB's Villeroy warned that the Eurozone now faces risks of entrenched inflation, with price growth becoming more widespread, and potentially more persistent, adding that the central bank's policy response was moving from a 'sprint' to a 'long-distance race'.

STOCK SPECIFICS: In M&A, Carrefour's (CA FP) Brazil unit agrees to reduce the price of its acquisition of Grupo Big by up to BRL 1bln. Danone (BN FP) acquires Promedica, according to Reuters citing sources. In financials, Swiss Lower House voted to retrospectively reject Credit Suisse's (CSGN SW) CHF 109bln rescue package, after the Upper House earlier retrospectively approved the financial guarantees. HSBC (HSBA LN) US unit says has hired Silicon Valley Bank (SIVB) veterans to establish a dedicated banking practice which will focus on Healthcare and Tech. In energy, In its Q1 update, Repsol (REP SM) said production was +10.3% vs Q4 levels. Petrofac (PFC LN) recognised an additional EBIT reduction, now expects to report a FY group EBIT loss in FY22. In materials, Anglo American (AAL LN) rough diamond sales value for De Beers' third sales cycle of 2023 amounted to USD 540mln (vs USD 497mln in Cycle 2 of 2023, and vs USD 566mln in Cycle 3 of 2022). In communications, Universal Music Group (UMG NA) tells streaming platforms to block AI services from scraping metadata from copyrighted songs. In industrials, Truck maker Volvo AB (VOLVA SS) posted a record profit in Q1, with revenue and margins also topping estimates. Our full European equity specific briefings for April 12th can be accessed here and here. It is worth noting that luxury giant LVMH (MC FP) will report results after the European close today.

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: It is a quiet day for European data and events, with only ECB's Vice President de Guindos due to speak (no text release). From the UK, BoE Governor Bailey will speak at the IMF on "the shifting risk landscape". On the supply front, the UK will sell GBP 900mln of 2039 linkers, while Germany will sell EUR 1bln of 2048 and EUR 1.5bln of 2052 debt.


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  NORTH AMERICAN DATA/SPEAKERS: The main event is the CPI data for March (brief preview below), where the rate of annual headline inflation is expected to cool, although the consensus expects the annual rate of core inflation to pick up a touch. Weekly MBA mortgage applications data is due before the open. In central banks, The FOMC meeting minutes will be released in the afternoon (preview below). Elsewhere, the BoC is expected to keep rates unchanged; the central bank will also publish updated projections (preview below). On the supply front, the US will sell USD 32bln 10yr Note Auction.


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  ENERGY: Ahead of today's EIA weekly energy inventory report, the API's weekly gauge of energy stocks reportedly showed headline crude stocks built by 0.4mln bbls in the week (exp. -0.6mln), with stocks at cushing drawing down by 1.4mln; gasoline inventories built by +0.5mln (exp. -1.6mln), while stocks of distillates drew down by 2mln (exp. -0.8mln).


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  PREVIEW - US CPI (13:30BST/08:30EDT): The consensus looks for headline consumer prices to rise 0.2% M/M, and for the annual rate to cool to 5.2% from 6.0% in February. The core measure of CPI is seen rising 0.4% M/M, although the annual rate is expected to tick up by one-tenth of a percentage point to 5.6%. Within the release, traders will be eying the components from the services sector, which officials still see as a source of discomfort. Fed policymakers have recently looked through the woes in the banking sector, and have emphasised their commitments to bringing inflation under control, with many noting that there is still more work to be done given that inflation is still running significantly above target, despite the progress made thus far. Additionally, some have highlighted that recent moves by OPEC to tighten crude oil markets adds to the uncertainties in bringing down price pressures in the months ahead. While the data will help us shape expectations about what the Fed will do at the May 3rd FOMC meeting, analysts note that there are still further data points that will influence the central bank’s thinking before then.


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  PREVIEW - BOC RATE DECISION (15:00BST/10:00EDT): The BoC is expected to keep rates unchanged at the 'terminal' rate of 4.5% in fitting with the central bank's guidance. This meeting will be accompanied by the latest MPR and the following press conference where any commentary on rate guidance throughout the rest of the year will be eyed, but the BoC will likely reiterate its "conditional pause" language. Growth expectations will likely be revised higher for Q1 23 as the Canadian economy appears more robust than previously thought, while updated inflation expectations from the BoC will be eyed to help gauge the next steps for policy after the "conditional pause", although the bar for rate hikes or cuts is quite high. Full Newsquawk Preview here.


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  PREVIEW - FOMC MEETING MINUTES (19:00BST/14:00EDT): Since the March FOMC, fears around the banking crisis have cooled, with no additional failures reported, reducing chances of an imminent policy shift from the Fed with the labour market still tight and inflation still well above target. WSJ reported that the March decision to hike was one of the closest calls at the FOMC in years, coming down to the wire as officials kept track of the fallout from SVB and questioned whether they should pause. Fed officials have since been cautious about getting ahead of, or forecasting, any sharp falls in credit availability, instead sticking to the status quo in terms of the need to bring down inflation whilst caveating that there is great uncertainty hanging over the banking sector. The minutes will provide us with more insight into how the recent banking failures played into the policy decision and the extent to which the overhang of the events may cap the degree that officials tighten further. Officials have been reticent to get into specifics about how much they see reduced bank lending as a substitute for Fed rate hikes, and it's unlikely the minutes will give us much either, although they should reveal a nod to the relationship as some officials have pondered in public comments lately. Full Newsquawk Preview here.

12 Apr 2023 - 08:10- Fixed IncomeData- Source: Newsquawk