April 6, 2023
- Oil headed for a third straight weekly gain after a surprise supply cut by OPEC+ and a drop in US inventories tightened the market outlook. Yields slumped on bets the world economy is set for a sharper slowdown. The two-year Canada benchmark traded at 3.55% early Thursday ahead of a Statistics Canada jobs report, due at 8:30 a.m. Ottawa time. Economists are looking for a small gain in the labor force and an unemployment rate of 5.1%.
- European stocks advanced before the Easter holiday as traders awaited US jobs data to assess their impact on Federal Reserve monetary policy. The Stoxx Europe 600 rose 0.5% by 9:11 a.m. in London. Travel and leisure as well as real estate shares outperformed while consumer products stocks were laggards. European stocks had their worst March since 2020 amid the turmoil in the financial sector, with sentiment damped by mixed economic data and continuing rate hikes. Traders have been rotating out of more cyclical shares like banks and into defensive and growth stocks, including technology.
- Treasury yields extended a slump and US equity-index futures fluctuated as bets the world economy is set for a sharper slowdown outweighed concerns over elevated inflation and monetary tightening. The two-year US rate, which is the most sensitive to monetary policy, slid for a fifth day, its longest streak since July 2022. Contracts on the Nasdaq 100 index fell 0.3%, while a gauge of global stocks headed for a weekly loss, after a private US jobs report and purchasing managers’ indexes provided further evidence the world’s largest economy is faltering. Signs of slower activity have added to worries over the financial system sparked by bank failures. Economists now assign a 65% probability of a US recession and money markets see only a 44% chance the Federal Reserve will raise interest rates by 25 basis points in May. That marks a contrast to the start of the week when they had seen a 70% prospect of the hike. Now they also expect the central bank to start cutting rates as early as July.
- Asia stocks declined as mounting recession fears and deepening tensions between the US and China dented investor sentiment. The MSCI Asia Pacific Index dropped as much as 1%, with Japan and South Korea leading declines in the region. Gauges in Hong Kong eked out small gains while those in mainland China and Taiwan fell as traders returned from holidays. Measures in India bucked the selloff, erasing earlier losses, after its central bank unexpectedly left the benchmark interest rate unchanged. Markets in the Philippines and Thailand were closed for a holiday. Chip-related stocks such as Samsung, TSMC and Tokyo Electron were among the biggest drags on the Asian gauge amid worries over the US-China technology trade spat. A report by Yomiuri said Asia’s largest economy has urged the World Trade Organization to probe practices of US and its allies over their export curbs. Meanwhile, Samsung is expected to report its worst profit in at least 14 years on Friday.
- Oil headed for a third straight weekly gain after a surprise supply cut by OPEC+ and a drop in US inventories tightened the market outlook. West Texas Intermediate futures eased toward $80 a barrel Thursday, but are still about 6% higher this week. Monday’s surge was the largest in a year, following the decision of the Organization of Petroleum Exporting Countries and its allies to slash more than 1 million barrels of daily output starting in May. Saudi Arabia has since hiked prices of all its oil sales to customers in Asia. Crude has risen about 25% since mid-March, when it collapsed to a 15-month low on the back of a banking crisis that prompted a flight from riskier assets. Prices were already recovering amid growing Chinese fuel demand and a weakening US dollar when OPEC+ intervened, confounding short sellers and amplifying the rebound.
- Gold steadied above $2,000 an ounce as traders digested the latest data from the US and its potential impact on the Federal Reserve’s interest-rate path. Recession concerns increased after data on Wednesday showed the US service sector expanded in March at a much slower pace than projected, while companies added fewer jobs than forecast. Swaps traders raised their bets for rate cuts later this year on concerns the economy was cooling. Bullion is now in sight of a record high after surging in March due to turmoil in the banking sector. Investors will be closely watching for more signs the Fed may be taking the heat out of the economy and putting the brakes on inflation when crucial monthly figures on nonfarm payrolls and unemployment are released on Friday. Spot gold declined 0.2% at $2,017.01 an ounce as of 8:55 a.m. in London, after earlier in the week surging to the highest since March 2022. The Bloomberg Dollar Spot Index was flat. Silver was steady, platinum gained, while palladium declined.
- Copper rose with other metals after data showed China’s services activity accelerated in March, bolstering hopes for an improvement in the economy. The Caixin China services purchasing managers’ index rose to its highest since November 2020, beating expectations. While services aren’t as important as manufacturing and construction for metals demand, the reading suggests business and household confidence is healing. Metals had broadly declined over the previous three days on worries about recession risks in the rest of the world. Recent US data — on services activity or private payrolls — has missed expectations, and investors are awaiting a key jobs report due Friday.
- Apple Inc.’s slowing growth and cash-rich balance sheet are again fueling speculation that the world’s most valuable company should make a big acquisition. Entertainment giant Walt Disney Co. recently joined a long list of potential acquisition targets that over the years has grown to include Netflix Inc., Tesla Inc., Peloton Interactive Inc. and Sonos Inc. They all have one thing in common: Anyone betting that Apple would buy them has so far been sorely disappointed. Apple is famous for eschewing splashy acquisitions in contrast with peers like Microsoft Corp. and Amazon.com Inc., which have continued to make deals despite increasing scrutiny by regulators. Instead, Apple favors buying small startups to augment its home-grown pushes into new markets even if those efforts take many years to bear fruit.
- The approaching US earnings season is expected to be the gloomiest since the pandemic, according to Goldman Sachs Group Inc. strategists. Analyst consensus expectations are for S&P 500 earnings-per-share to fall 7% in the first quarter from a year earlier, marking the sharpest decline since the third quarter of 2020 and a low point in the profit cycle, strategists including Lily Calcagnini and David Kostin wrote in a note. “If analyst projections are realized, this quarter will represent the trough in S&P 500 earnings growth.” A deep contraction in margins will mostly outweigh modest growth in first-quarter sales. Just three sectors — energy, industrials and consumer discretionary — are forecast to report improved margins. The majority of other industries will likely see theirs shrink by more than 200 basis points, they said.
- After announcing the largest rounds of layoffs in their history, US big tech companies are now learning how difficult it is to reduce headcount in Europe. In the US, companies can announce widespread job cuts and let go of hundreds if not thousands of workers within months — and many have. Meanwhile, in Europe, mass layoffs among tech companies have stalled because of labor protections that make it virtually impossible to dismiss people in some countries without prior consultations with employee interest groups. In France, Google parent Alphabet Inc. is currently in talks to reduce headcount through voluntary departures, offering severance packages that it hopes are generous enough to get workers to leave, people familiar with the matter said, asking not to be identified because the information isn’t public. Amazon has tried to get some senior managers there to resign by dangling as much as one year’s pay and has granted leave to departing employees so their shares can vest and be paid out as bonuses, one person with knowledge of the situation said.
- Converting the world to entirely clean energy will require $10 trillion worth of investment, but continuing to rely on fossil fuels would cost even more, according to Elon Musk. A massive build-out of solar-panel factories and metal refineries are required over the next 20 years to deliver renewable-power generation and electricity-storage capacity needed to power the global economy entirely with carbon-free energy, Tesla Inc. said in its Master Plan Part 3 published Thursday. The white paper fleshes out the details of Musk’s vision for a world without fossil fuels first outlined during last month’s investor day. “Earth will move to a sustainable energy economy,” Musk said during the event in Austin, Texas. “And it will happen in your lifetime.”
- BlackRock Inc. was hired as an adviser to help the US government arrange the sale of $114 billion in securities that were held by failed lenders Signature Bank and Silicon Valley Bank. The asset-management giant will conduct the sales of $27 billion in securities from Signature and $87 billion from Silicon Valley Bank, the Federal Deposit Insurance Corp. said in a statement Wednesday. The holdings are mostly agency mortgage-backed securities, collateralized mortgage obligations and commercial MBS, the FDIC said. The sales “will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions,” the FDIC said.
- Spain is providing 2.1 billion euros ($2.3 billion) to help fund South Africa’s energy transition and water needs, even as some of the world’s richest nations struggle to push forward on a ground-breaking climate-finance initiative with the continent’s most-industrialized country. The Spanish funding is being provided through a mixture of financial instruments, with the country’s government working with its development finance institution, Cofides, and South Africa’s Industrial Development Corp., said Ambassador Raimundo Robredo Rubio. While not part of it, the Spanish initiative is in line with the aims of the $8.5-billion Just Energy Transition Partnership between South Africa and funding partners including France, Germany, the US, UK and the European Union. That program has been hailed as a pioneering example of how rich nations can help wean developing nations off their dependence on coal.
- Shell Plc’s gas-trading business has delivered a strong performance so far this year after driving record profit in 2022. Preliminary numbers published Thursday showed Shell managed to maintain healthy results from that division in the first quarter, even with European natural gas prices far below August’s high. Its liquefied natural gas business has boomed amid Europe’s pivot away from Russian piped supply, and is likely to be a priority for new Chief Executive Officer Wael Sawan. Gas trading is “expected to be at a similar level compared to the fourth quarter,” the oil major said in a statement ahead of a full earnings report on May 4. Marketing results are seen higher, while trading in the chemicals division was “significantly” higher than the prior quarter.
- Airbus SE will double production capacity in China of its best-selling single-aisle jet, in a bold bet on future demand for air travel and lucrative aircraft orders in one of the world’s biggest aviation markets. The European planemaker will add a second final assembly line at its existing factory site in Tianjin, under a deal signed by Chief Executive Officer Guillaume Faury in Beijing on Thursday. The move is a confidence boost for Chinese manufacturing as other firms like Apple Inc. rethink production in the nation after enduring three years of Covid Zero and the harsh lockdowns and restrictions that went with it. The expansion of the Tianjin facility will further Airbus’s plan to produce as many as 75 A320neo family jets a month by 2026. At the plant, which opened in 2008, workers stitch together major sections, such as wings and fuselage assemblies. Airbus and chief rival Boeing Co. have struggled to raise output amid supply-chain constraints as demand for new aircraft has surged coming out of the pandemic.
- The spread between AMC Entertainment Holdings Inc.’s common-stock price and its preferred shares widened on Thursday after Delaware’s Court of Chancery denied the company’s motion to lift a Status Quo Order which would have allowed the conversion between the two units to proceed. AMC’s common stock rose as much as 15% in premarket trading, while its preferred shares — listed under the ticker APE — fell as much as 15%. That broadened the gap between the two shares to roughly $3, a jump from the $2.34 that it had closed at on Wednesday.
- Israel faced a new barrage of rockets fired from the Gaza Strip as violence continued a day after Israeli fighter jets hit Hamas weapons-manufacturing and storage sites. Tensions have been escalating with the week-long Jewish Passover holiday, overlapping with the holy Muslim month of Ramadan. Late Wednesday, renewed clashes broke out between Israeli police and Palestinians inside the Al-Aqsa Mosque in Jerusalem, a flashpoint. Seven surface-to-air rockets exploded in mid-air without being intercepted after being launched from the Gaza Strip, setting off air raid sirens, the Israeli military said. Five were fired at southern Israel and two toward the Gaza Strip Sea, it said.
- French unions are leading another round of strikes and protests against President Emmanuel Macron’s pension reform on Thursday, capitalizing on broad public support for a movement that has caused trash to pile up on the streets of Paris and sporadically turned violent. The bill to raise France’s minimum retirement age to 64 from 62 has already passed parliament, but unions are betting they can still force a U-turn. They continue to rally record turnouts at nationwide marches, tapping into rising anger after the government dodged a National Assembly vote by using a provision known as Article 49.3. Protesters are also seeking to maintain pressure ahead of a ruling by the Constitutional Council on the conformity of the reform due on April 14.
- Top Credit Suisse Group AG executives will have outstanding bonuses canceled or cut by up to half, in a step ordered by the Swiss government following the state-backed takeover by UBS Group AG. After a temporary suspension on March 21, the government said it has now decided that the executive board will have all outstanding variable remuneration to the end of 2022 canceled, while top managers one and two levels below will have theirs reduced by 50% and 25% respectively, according to a statement on Wednesday. The same measures apply for compensation that had begun accruing for this year. In total the steps will affect around 1,000 Credit Suisse employees and bonuses worth between 50 million and 60 million Swiss francs ($66.3 million).
- Property taxes increased twice as fast last year than in 2021 in the US, with many areas in the South and West increasing by more than the national average. Even after the gains, single-family-home property taxes remain much lower in the Sun Belt than in the Northeast, according to a report released by real estate data firm Attom on Thursday. On average, people in Florida paid less than $4,100 a year on property taxes in 2022 — not even half the bill for a typical New Jersey resident. In that state’s Essex and Bergen counties, the charge per homeowner exceeded $13,000 — more than $1,000 a month.
- French President Emmanuel Macron urged Xi Jinping to use his influence to help restore peace to Ukraine, saying the Chinese leader could bring all sides together to discuss a way to end the Russian invasion. “I know I can count on you to bring Russia back to reason and everybody to the negotiation table,” Macron told Xi during a meeting in Beijing on Thursday. Xi has sought to rally international support for a vague blueprint to bring peace to Ukraine following Russian leader Vladimir Putin’s invasion last year. While the US and its allies have dismissed any cease-fire proposal that would allow Russia to keep territorial gains, some countries like France have welcomed China’s effort to find a diplomatic resolution.