Image Source: DepositPhotos

US equity futures pointed to even more gains on the last day of trading, leaving the S&P 500 set for a third weekly rise — the longest run since February. The rally was given fresh legs last week by more earnings optimism coupled with disappointing economic data – this time the highest initial jobless claims since last August – that supported the case for Fed rate cuts, but the real test will come with a key US inflation print next week (where we laid out a case for why as OER catches down to real-time rates, CPI may print a big miss).  As of 8:00am, S&P 500 futures higher by 0.3% after the index closed less than 1% away from its all-time high, with Nasdaq futures rising 0.4%. European stocks are up 0.9% set for a new record high with Asian stocks also gaining. Treasuries and the dollar were flat; earlier on Friday, the yuan weakened on the news that Biden’s administration is poised to unveil a sweeping decision on new China tariffs as soon as next week, with the measures expected to focus on industries such as electric vehicles, batteries and solar cells, with existing levies largely being maintained. The macro slate includes May preliminary University of Michigan sentiment and April monthly budget statement.
In premarket trading, 3M Co. (MMM) rose 1.2% in premarket trading after HSBC raised its recommendation to buy from hold. The bank notes the company’s earnings showed nascent signs of an “inflection in growth and margin gains from restructuring” at the manufacturing giant. Akamai fell 10% after its forecast for adjusted earnings per share for the second quarter missed the average analyst estimate. Analysts note weakness in the infrastructure software company’s content-delivery network business. Here are some other notable premarket movers:
 

The rebound in stocks found fresh momentum from very poor US unemployment claims Thursday, which backed the case for rate cuts before next week’s key US inflation print. Meanwhile, so-called value and cyclical sectors are helping to broaden out a rally that had been fueled by tech giants. Traders will be watching for hints on the timing of policy easing from Fed officials including Michelle Bowman and Neel Kashkari before next week’s CPI data.“A rally of the laggards is our key allocation call, and so far, we’re witnessing signs that it’s happening,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. “For this to persist, the market needs to maintain a delicate balance — a sweet spot where the job market remains mildly soft and earnings growth continues.”European stocks are set for their best week since the end of January on a slew of better-than-expected earnings reports and growing confidence that interest rate cuts are still possible this year. The Stoxx 600 rises 0.9% to a record high with mining, utility and construction shares leading gains. Here are the biggest European movers:

Asian stocks tracked the gains in the US where a rise in initial jobless claims spurred a dovish reaction. Hang Seng & Shanghai Comp traded mixed with Hong Kong stocks surging on reports China is considering a proposal to exempt individual investors from paying dividend taxes on Hong Kong stocks bought via the Stock Connect, while the mainland faded its initial gains with the US reportedly set to impose tariffs on China EVs and key sectors after a review which could be announced as soon as next week. Nikkei 225 rallied at the open but then slipped from intraday highs with participants reflecting on Household Spending data, US-China and tensions and amid a busy day of earnings releases for Japan. ASX 200 was led by energy, telecoms and financials but with gains capped amid mixed consumer stocks.In FX, the Bloomberg Dollar Spot Index steadied and Treasury yields were little changed across the curve as traders awaited commentary from several Fed officals; Sterling rose after a much stronger than expected UK GDP print, which saw the country emerge from recession, provided a modicum of support to the pound which is up 0.1% against the dollar. The Norwegian krone tops the G-10 FX pile, rising 0.3% after CPI topped estimates.

In rates, treasuries are little changed with futures holding Thursday’s advance, underpinned by gains for gilts following UK data raft including GDP, manufacturing and industrial production. US yields are within 1bp of Thursday’s closing levels, 10-year around 4.46%, with gilts and bunds outperforming by 2bp and 3bp in the sector; curve spreads likewise little changed, 2s10s holding Thursday’s flattening move. Gilts have rallied despite stronger-than-expected UK GDP figures, with UK 10-year yields falling 3bps to 4.11%.In commodities, Oil prices advance, with WTI rising 0.6% to trade near $79.80 a barrel and near the week’s high. Spot gold climbs 1.1% to around $2,372/oz.Looking at today’s calendar, the US economic data slate includes May preliminary University of Michigan sentiment (10am New York time) and April monthly budget statement (2pm). Fed officials’ scheduled speeches include Bowman (9am), Logan (10am), Kashkari (10am, 2:15pm), Goolsbee (12:45pm, 2:15pm) and Barr (1:30pm)
Market Snapshot

Top Recent News

A more detailed look at global markets courtesy of NewsquawkAPAC stocks mostly tracked the gains in the US where a rise in initial jobless claims spurred a dovish reaction. ASX 200 was led by energy, telecoms and financials but with gains capped amid mixed consumer stocks. Nikkei 225 rallied at the open but then slipped from intraday highs with participants reflecting on Household Spending data, US-China and tensions and amid a busy day of earnings releases for Japan. Hang Seng & Shanghai Comp traded mixed with Hong Kong stocks surging on reports China is considering a proposal to exempt individual investors from paying dividend taxes on Hong Kong stocks bought via the Stock Connect, while the mainland faded its initial gains with the US reportedly set to impose tariffs on China EVs and key sectors after a review which could be announced as soon as next week.
Top Asian News

European bourses, Stoxx600 (+0.7%) are entirely in the green, taking the lead from a mostly positive APAC session. Both the FTSE 100 and the DAX 40 made fresh ATHs today. European sectors hold a strong positive tilt, with the exception of Autos and Media, with the former continuing the losses seen in the prior session. Utilities takes the top spot, lifted by post-earning strength in Enel (+3.6%) and EDP (+2.5%). US Equity Futures (ES +0.3%, NQ +0.3%, RTY +0.4%) are entirely in the green, albeit modestly so, attempting to build on yesterday’s advances.
Top European News

FX

Fixed Income

Commodities

Geopolitics

US Event Calendar

Central Bank Speakers

DB’s Jim Reid concludes the overnight wrapRisk assets posted further gains yesterday, thanks to growing confidence that central banks would still cut rates this year. In part, that was because of the weekly initial jobless claims in the US, which hit an 8-month high and added to fears that the labour market was cooling further. But alongside that, the Bank of England announced their latest policy decision, where Governor Bailey said it was “ likely that we will need to cut bank rate over the coming quarters ”. So this all cemented the theme that global monetary policy was heading towards a less restrictive stance, not least after the Riksbank’s rate cut earlier in the week. The next hurdle will be the US inflation numbers for April next week, but so far this month at least, investors have moved to expect a more dovish stance of monetary policy than they thought would happen at the end of April.This trend was very helpful for equities, with several European indices up to new records yesterday, including the STOXX 600 (+0.19%), the FTSE 100 (+0.33%) and the DAX (+1.02%). Indeed, it marked a 5th consecutive advance for all three indices, and it leaves the DAX on track for its best weekly performance since November, having risen by +3.81% since the start of this week. Meanwhile in the US, the S&P 500 (+0.51%) was up to a 5-week high, and the index remains on track for a third consecutive weekly gain for the first time since February. On top of that, it’s also been the strongest performance for the S&P 500 over 6 sessions so far this year, having advanced by +3.90% since its recent low on May 1. The gains for the S&P 500 were broad-based with 10 of 11 industry groups higher on the day, and came even as the Magnificent 7 (-0.07%) was weighed down by losses for Nvidia (-1.84%) and Tesla (-1.57%).That jobless claims data was the initial catalyst for the advance yesterday, and up until that point, S&P 500 futures had actually been in negative territory. The release showed that initial jobless claims were up to 231k (vs. 212k expected) in the week ending May 4, which was their highest level since late-August, and above every economist’s estimate on Bloomberg. But even though the data was weaker than expected, it meant investors grew more confident that the Fed would still cut rates this year, as it added to recent prints suggesting the labour market could be cooling. For instance, last week’s data showed job openings were down to a 3-year low in March, whilst the broader U6 measure of unemployment (which includes the underemployed and those marginally attached to the labour force) rose to its highest in over two years in April, at 7.4%.But even with the uptick in jobless claims, this isn’t necessarily a leading indicator of a downturn. For instance, there was a previous spike last year, which pushed the 4-week average above 250k by late-June. But after that, the numbers came down again shortly afterwards, and there wasn’t a notable rise in the unemployment rate. And for the time being at least, the smoother 4-week average is still only at 215k, so it’s important to bear in mind that lots of other indicators are still looking more positive, and the Atlanta Fed’s GDPNow indicator is suggesting that Q2 growth will come in at an annualised +4.2% rate.This belief in future rate cuts was supported by the Bank of England’s latest decision as well. The main headline was that they kept rates unchanged at 5.25%, in line with expectations. But unlike the March meeting, when the vote was 8-1 to keep rates on hold, there was now a 7-2 split after Deputy Governor Ramsden also voted for a cut. Moreover, there was an additional line in the statement, which said that the committee would “consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding.” Then in the press conference, Governor Bailey said that a cut at the next meeting in June was “neither ruled out nor a fait accompli ”, and he suggested that the reductions in bank rate could be “possibly more so than currently priced into market rates”. There are two more CPI prints coming out ahead of the BoE’s next decision, so those will be in focus ahead of that, and this morning we’ve also got the Q1 GDP release shortly after we go to press.Overall, the decision and these comments led investors to price in a growing probability of a rate cut by the next BoE meeting in June, with overnight index swaps raising the chance from 55% the previous day to 60% by the close. Front-end gilts also rallied on the prospect of faster rate cuts, with the 2yr yield coming down by -5.7bps. 10yr gilts did lose a bit of ground, with yields up +0.2bps, but that was actually an outperformance relative to the rest of Europe, where yields on 10yr bunds (+3.3bps), OATs (+4.3bps) and BTPs (+3.7bps) all saw larger moves higher.Meanwhile in the US, Treasuries outperformed after the jobless claims data led futures to dial up the likelihood of rate cuts this year. For instance, 46bps of cuts were priced in by the December meeting at the close, up +1.9bps relative to the previous day. In turn, the 2yr yield was down -2.1bps to 4.82%. And 10yr yields were down -4.1bps to 4.45%, with long-dated Treasuries supported by a solid 30yr auction that saw the highest direct bidder share since July.Overnight in Asia, this strength for risk assets has broadly continued, with the Hang Seng (+1.74%) rising to its highest level in almost nine months, whilst the Nikkei (+0.24%) and the KOSPI (+0.60%) have also advanced. The exception to this has been in mainland China, where the CSI 300 (-0.28%) and the Shanghai Comp (-0.22%) have both lost ground, which comes as a Bloomberg report said that the US would announce new tariffs on China. The report cited people who said an announcement was scheduled for Tuesday, and there would be a focus on strategic sectors including electric vehicles. Elsewhere, US equity futures are also positive this morning, with those on the S&P 500 up +0.09%.To the day ahead now, and data releases include the UK GDP reading for Q1, Italian industrial production for March, Canadian employment for April, and in the US there’s the University of Michigan’s preliminary consumer sentiment index for May. From central banks, we’ll hear from the Fed’s Bowman, Logan, Kashkari, Goolsbee and Barr, the ECB’s Cipollone and Elderson, and the BoE’s Pill and Dhingra. We’ll also get the account from the ECB’s April meeting.More By This Author:IPO Nearing? Elon Musk’s Starlink In Hyper-Growth, Surprises Analysts With $6.6 Billion Revenue Projection
Stocks End Week On Muted Note As Stagflation Fears Mount
Yields Slide To Session Low After Stellar 30Y Auction