MARKET WRAPS
Stocks:
European shares were mostly lower on Friday with market sentiment strained after the Bank of Japan announced tweaks to its yield-curve control, hinting it would tolerate higher interest rates.
"This unexpected move has left investors pondering whether it is simply a technical adjustment to the yield-curve-control policy, or the beginning of a tightening cycle," resulting in weakness across stock markets, IG said.
U.S. Markets: Markets:
Stock futures gained ahead of more big-name earnings. Exxon Mobil, Procter & Gamble and Chevron are among the companies poised to report before markets open.
Friday will also see two major releases on inflation: the PCE price index, which is the Fed's preferred measure of inflation, as well as the quarterly employment cost index, a crucial measure of wages.
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Forex:
With both the Fed and the ECB saying that future rate decisions will depend on upcoming economic data, the short-term outlook for the dollar looks more favorable than the euro, Commerzbank said.
"The risk reward ratio seems considerably more attractive on the dollar side in view of the economic data from the U.S. and the eurozone over the past few days."
Read EUR/USD's Mid-July High of 1.1275 Could be Peak for Now, Charts Show
Bonds:
Eurozone government bond yields rose after the Bank of Japan introduced yield curve control with greater flexibility, keeping the 10-year yield target around 0%.
"The market has little room to breathe with the BOJ surprise adding to the bearish momentum, which already set in yesterday afternoon when U.S. Treasuries came under pressure when sources about today's BOJ tweak emerged," Commerzbank Research said.
Read Bank of Japan Hints It Will Accept Higher Rates, Lifting Bond Yields
Societe Generale said the 10-year Italian BTP-German Bund yield spread is expected to remain at attractive levels.
"We expect the 'feel good' premium in BTPs to remain in 2H as domestic investors are still buying and we don't foresee political tensions to emerge."
Societe Generale targets the 10-year BTP-Bund yield spread at 185 basis points in the fourth quarter; it currently trades 1 basis point lower at 162 basis points, measured between the 4.35% November 2033 BTP and the 2.30% February 2033 Bund.
Energy:
Oil futures remained on course for a fifth consecutive weekly increase, with strong U.S. economic data on Thursday the latest factor giving prices a boost.
"Crude oil gained as strong economic data improved the outlook for demand. This strengthened the case for a soft landing following the aggressive rate hike cycle by the Fed," ANZ said.
Metals:
Copper prices were firmer and on course for a weekly gain as expectations of Chinese stimulus have overcome fears about the nation's metals demand.
"Industrial metals continue to face headwinds from weak activity in mainland China. Nevertheless, prices have jumped in recent weeks on account of expectations of a stimulus announcement from the Mainland Chinese government," BMI said.
Beijing has hinted that it is planning stimulus measures to support China's property developers, potentially boosting home building and with it copper demand.
DOW JONES NEWSPLUS
EMEA HEADLINES
German Economy Stagnated in 2Q, Missing Expectations of Growth
The German economy avoided its recession continuing into second quarter of 2023, posting no growth, as household consumption stabilized after contracting in the winter.
Germany's gross domestic product flatlined from April to June compared with the previous quarter, according to preliminary data from the country's statistics office released Friday, from a upwardly revised 0.1% decline in the first quarter of the year.
AstraZeneca Shares Rise After 2Q Revenue, Earnings Beat Market Views
AstraZeneca shares rose Friday after the company reported a significant rise in second-quarter revenue and earnings per share, ahead of market views, and backed its full-year guidance.
Shares at 0746 GMT were up 3.7%, or 400 pence, at 11,100 pence.
NatWest Lowers 2023 Net Interest Margin Guidance; 2Q Pretax Profit Beat Views
NatWest Group on Friday posted better-than-expected pretax profit for the second quarter of 2023 and trimmed its net interest margin guidance for 2023, though it backed its other targets.
The U.K. bank now expects its banking net interest margin for the year to be less than 3.20%, from around 3.20% previously, with the margin currently seen at around 3.15%.
IAG Swung to 1H Net Profit on Strong Demand, Outperformance of Spanish Business
International Consolidated Airlines Group said Friday that it swung to a net profit for the first half on strong demand and the outperformance of its Spanish business, and that its outlook for summer was encouraging as around 80% of its expected revenue for the period was already booked.
The airline group-which houses carriers British Airways, Iberia and Vueling, among others-said that for the six months ended June 30, its net profit was 921 million euros ($1.01 billion) compared with a net loss of EUR654 million in the year prior-period.
Air France-KLM's 2Q Profit, Revenue Beat Expectations
Air France-KLM confirmed its capacity forecast for the year after reporting a profit and revenue well ahead of analysts' expectations for the second quarter, marked by a growing number of passengers, higher load factors and strong yields.
The Franco-Dutch carrier group on Friday posted revenue of 7.62 billion euros ($8.37 billion) for the three months to the end of June, up 14% on year. The group handled 24.7 million passengers in the quarter, 8.2% more than last year.
Casino Shares Slump After Rescue Agreement With Kretinsky-Led Consortium Disappoints
Shares of Casino Guichard-Perrachon plunged in early trading Friday after the embattled French grocer said that an agreement in principle with a consortium led by Czech billionaire Daniel Kretinsky to shore up its capital base and restructure its debt would still cause losses for existing shareholders.
At 0730 GMT, Casino shares traded 14% lower at EUR2.66.
Sanofi Raises 2023 Outlook After 2Q Adjusted Earnings Beat Views
Sanofi on Friday raised its 2023 guidance and reported second-quarter adjusted earnings that beat analysts' expectations despite sales that fell short of estimates.
The French pharmaceutical company said it now expects business earnings per share-one of the company's preferred earnings metrics-to grow in a range of mid single percentage digits at constant exchange rates, barring unforeseen major adverse events. It previously expected growth of low single digits.
Standard Chartered Lifts Guidance on Strong First-Half Earnings
Standard Chartered's first-half net profit rose 20% on year, helped by higher net interest income.
The Asia-focused lender on Friday posted an underlying net profit of $2.13 billion as operating income rose 14% to $8.95 billion, which the bank said was the highest half-yearly income since the second half of 2014. The growth has been driven by sharply higher net interest income, which grew 29% on an underlying basis amid the tightening of monetary policy globally.
Eni 2Q Profit Plunged Amid Lower Oil, Natural Gas Prices
Eni posted a much lower profit for the second quarter, as the group reeled from the effects of declining benchmark crude oil and natural gas prices.
The Italian oil-and-gas major on Friday said that quarterly net profit plunged to 294 million euros ($322.8 million) from EUR3.82 billion in last year's second quarter. On an adjusted basis, net profit declined 49% to EUR1.94 billion.
Capgemini Backs 2023 View After 1H Profit, Revenue Rose
Capgemini on Friday reported higher net profit and revenue for the first half of the year and backed its 2023 guidance.
The French information technology company said net profit rose to 809 million euros ($888.2 million) from EUR667 million in the first half of 2022. Revenue rose to EUR11.43 billion from EUR10.69 billion a year ago. The company's operating profit rose 8% to EUR1.15 billion, which led to a margin of 10.1%, compared with a previous margin of 10%.
Hermes 1H Earnings Rose, Boosted by Asia Sales Growth
Hermes International said Friday that earnings rose in the first half of the year, helped by the rebound of wholesale and in-store sales in Asia .
The French luxury fashion company said it made 2.23 billion euros ($2.45 billion) in profit in the first six months of the year compared with EUR1.64 billion a year prior, on sales that grew 25% at constant currency rates to EUR6.70 billion.
Vinci Posts First-Half Profit Rise, Backs 2023 Guidance
Vinci reported an increase in first-half earnings Friday, and backed its 2023 guidance after a six-month period of growth across its business.
The French infrastructure company said it made 2.09 billion euros ($2.30 billion) in net profit in the half, compared with EUR1.90 billion in the same period the prior year, on total sales that rose 14% to EUR32.73 billion.
Clariant 2Q Sales, Earnings Fell, Hit by Customers' Inventory Reductions
Clariant said Friday that second-quarter sales and earnings fell, hit by weak demand due to customers' efforts to reduce inventories, and reiterated its recently downgraded outlook for 2023.
The Swiss chemicals company said second-quarter earnings before interest, taxes, depreciation and amortization came to 175 million Swiss francs ($201.4 million) compared with CHF216 million in the year-earlier period. Sales for the period dropped 17% to CHF1.08 billion.
OMV 2Q Profit Slumped Amid Lower Market Prices
OMV posted lower profit and sales for the second quarter, in a context marked by significantly lower market prices.
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07-28-23 0534ET
