MARKET WRAPS

Stocks:

European stocks traded higher on Friday following inflation data from the eurozone which fell more than expected, though the core rate rose, complicating the task of the European Central Bank as it considers how much further its hiking cycle has to go.

Track the market, analyst reactions to the data here.

In the U.K., the FTSE 100 gained 0.4% after the latest GDP data showed the economy escaped a recession and expanded by 0.1% quarter-on-quarter in the first three months of 2023. Read more here.

"The UK has limped through the first few months of the year thanks to a surprisingly resilient consumer market and what is likely to have been a rush by businesses to make the most of generous tax breaks on investment before they came to an end," AJ Bell said.

Stocks to Watch

Ferrari's upcoming limited-edition plug-in hybrid models will cost customers about 80% more than their standard-edition counterparts, and could generate between 3% and 5% additional Ebitda in 2025, Equita Sim said.

The carmaker's SF90 XX Stradale comes with a price tag of EUR770,000 and the SF90 XX Spider will cost customers EUR850,000, Equita Sim said.

Both prices, announced Thursday, are significantly higher than Equita Sim's estimate for the average sale price of Ferrari's cars.

Deliveries of both models should start in 2024, it added.

Market Insight

U.S. Markets:

The final trading day of the week, month and quarter was presenting a mildly positive picture as investors await important inflation data.

Strong economic data in recent days have fueled a selloff in bonds by cementing expectations that the Federal Reserve will continue to raise interest rates to curb inflation.

Economic updates set for release include personal income and spending for May, the Chicago Business Barometer for June and the final reading of June consumer sentiment.

Stocks to Watch

Apple was rising 0.6% after shares were initiated with a Buy rating at Citi.

Constellation Brands will report earnings before the market opens. Shares were up 1%.

Nike reported fiscal fourth-quarter earnings that missed analysts' expectations and issued first-quarter guidance that also came up short. Shares fell 3.6%.

Follow WSJ markets coverage here

Forex:

The euro failed to benefit from higher-than-expected German inflation data and this doesn't bode well for the common currency ahead of eurozone inflation figures later, UniCredit Research said ahead of the data release.

"EUR/USD is also unlikely to receive much support from personal income and [personal consumption expenditure] data in the U.S. this afternoon, especially if the PCE and the core PCE deflators do not ease significantly," UniCredit said.

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The dollar traded flat following gains in the previous session after first-quarter gross domestic product data was revised higher.

The data firmed up calls for a 25 basis-point interest-rate hike from the Federal Reserve in July, ING said.

The core personal consumption expenditure price index could also support further rate rises, ING added.

"Barring a data surprise, the only threat to the strong dollar story comes from quarter-end rebalancing flows-which could generate some dollar selling at key fixings."

The DXY dollar index could rise to 103.65 unless fixing flows take their toll, ING said.

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Read Swedish Krona Could Stay Weak After Riksbank Decision

Bonds:

Eurozone sovereigns' government bond issuance for 2023 is progressing marginally quicker than in 2022, Barclays said.

Government bond supply year-to-date is EUR783 billion which represents an aggregate of around 60% of planned bond issuance for 2023, it said. This run-rate is around 2 percentage points ahead versus 2022.

Barclays strategists forecast this year's eurozone gross government bond issuance at EUR1.304 trillion, with the forecast including 13 countries: the 11 largest issuers plus Slovakia and Slovenia.

Despite a lighter second half versus 2022, "this H2 total is still significantly heavier relative to previous years."

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LBBW raised its three-month forecasts for 10-year Treasury and German Bund yields to reflect uncertainty about central bank's policy rates.

"The main reason for this is continued heightened uncertainty about the actual level of key interest rate peaks," it said.

"At the same time, we do not expect a sustained breakout of yields to the upside given further increasing recession risks."

LBBW's new forecast for the 10-year Treasury yield is 3.70% versus 3.50% previously, and for the 10-year Bund yield is 2.50% versus 2.40% before.

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German 10-year Bunds offer an entry opportunity if yields rise above 2.50% as the peak in yields is likely behind, Societe Generale said.

"Shifts in the monetary policy outlook shouldn't generate much of a trend in long-maturity yields in 2H23."

SocGen recommends buying duration once the 10-year Bund yield again rises above 2.50%.

Read German 10-Year Bund Yield Might Test 2.5% in Summer

Read Italy's Issuance Progress Seen Supportive for BTPs in 2H

Energy:

Oil prices moved higher, amid more positive economic data coming from the U.S. However, prices still remain fairly range bound.

Stronger-than-expected U.S. GDP data is adding impetus to prices, but this could also mean more rate hikes from the Fed, ING said.

"Growing expectations of further hikes is one of the factors which is capping the upside in the market, while on the downside, the belief that OPEC+ will take further action if there is significant further weakness provides a floor to the market."

Metals:

Base metals prices were mixed while gold was lower, as worries over Chinese demand continued to dominate the market.

"Industrial metals continue to face headwinds from weak activity in Mainland China," BMI said. "Weaker than anticipated metal demand and regulatory intervention will continue pressuring prices."

BMI added that the market is expecting state support to be introduced in the near term, which should boost prices.

DOW JONES NEWSPLUS


EMEA HEADLINES

Eurozone Inflation Fell More Than Expected in June Despite Rising Core Rate

Eurozone inflation fell more than expected in June as energy prices fell further and food prices eased, though the core rate grew, complicating the task of the European Central Bank as it considers how much further its hiking cycle has to go.

The consumer price index increased 5.5% in June on year, tumbling from 6.1% in May, preliminary data from the European Union's statistics agency Eurostat showed Friday.


UK Economy Expanded Slightly in First Quarter, Matching First Estimates

The U.K. economy grew marginally in the first quarter of 2023, matching previous estimates, as a cost-of-living crisis impacted by high inflation and rising interest rates weighed on economic activity.

Gross domestic product grew 0.1% from January to March compared with the previous three-month period, the same as the fourth quarter of 2022 and in preliminary estimates, according to data from the Office for National Statistics released Friday.


French Inflation Dropped More Than Expected in June

France's inflation rate fell more than expected in June, reaching its lowest level since March 2022, as fuel and food prices continued to ease.

France's consumer-price index rose by 4.5% on year in June, measured by national standards, compared with May's 5.3% increase, according to preliminary data from the country's statistics office Insee released Friday.


Engie Raises 2023 Outlook on Strength of Global Energy Management and Sales

Engie increased its 2023 earnings guidance on Friday due to the strength of its global energy management and sales business.

The French energy company said that it sees its 2023 recurring net income target between 4.7 billion and 5.3 billion euros ($5.11 billion-$5.76 billion). It had previously anticipated the metric at the upper half of the EUR3.4 billion to EUR4.0 billion range.


GLOBAL NEWS

Consumer Spending Streak Seen Extending Into May

New figures on consumer spending and inflation last month will add to the picture of an economy that is showing surprising strength despite a Federal Reserve campaign to slow growth and cool inflation.

The Commerce Department at 8:30 a.m. ET on Friday is set to release May figures on household spending, including on services such as travel, healthcare and entertainment, and the Fed's preferred inflation gauge. Consumer spending is the primary driver of U.S. economic growth.


Banks Brace for More Turmoil Heading Into the Third Quarter

Bank stocks have steadied after a monthslong spiral set off by the failure of three banks. Second-quarter earnings will test whether that moment of relative calm can last.


To Fight Stickier Inflation, Governments Take Aim at Corporate Profits

The next phase in the war against inflation is taking shape in Europe, where governments are actively cajoling businesses to cut prices on everything from pasta to chicken. Their argument: Profits are too high.

The European Union's statistics agency Friday said consumer prices in the 20 countries that share the euro were 5.5% higher than a year earlier, a decline from the 6.1% inflation rate recorded in May, and the slowest increase since the start of 2022.


China's Economy Shows New Signs of Weakness

HONG KONG-Evidence of China's flagging growth continues to roll in, raising questions about whether the government is doing enough to turn things around.

China's manufacturing sector contracted for a third straight month in June and the nonmanufacturing sector weakened, with new orders falling for both, the country's official statistics agency said Friday. Employment declined across both broad sectors, an indication that a nagging jobs shortage-particularly for young people-is worsening.


Ukraine Hits Russian Defenses From a Distance Before Risking Troops

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06-30-23 0641ET