MARKET WRAPS

Stocks:

European shares advanced on Friday as a slight shift in tone from some Federal Reserve officials had investors paring back their 100 bps rate hike bets.

Read: Fed Expected to Hike Interest Rates by 100 Basis Points in July

However, Italian political turmoil and worries that the Kremlin will end supplies to the Nord Stream pipeline that channels Russian natural gas to Europe have added to recession fears for the continent and capped stock market gains.

Stocks to Watch:

RWE is seen as well positioned to deliver long-term growth and shareholder value despite the current energy crisis, Berenberg said.

It said the energy company can count on a strong portfolio of renewables and flexible generation assets as well as a solid balance sheet supporting growth targets.

"We expect the flexible generation and trading portfolio to continue to perform well in volatile energy markets and should have a key role to play in ensuring security of supply."

Berenberg expects the company to be able to support a yearly EUR3.5 billion-EUR4.5 billion renewables capex until the end of the decade and beyond while remaining in line with leverage targets.

U.S. Markets:

Stock futures edged higher flat ahead of retail spending data and a fresh batch of bank earnings, both of which will be watched for insights into the state of the economy.

Some of the largest U.S. financial companies are due to report earnings ahead of the market open, including BlackRock, Citigroup, U.S. Bancorp, Wells Fargo and State Street.

In premarket trading, shares of Pinterest jumped 15% after The Wall Street Journal reported that activist investor Elliott Management has taken a big stake in the social-media company.

In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 2.937% from 2.957% Thursday.

Forex:

EUR/USD's rebound back above parity suggests investors are wary about selling the euro heavily ahead of next week's ECB meeting, UniCredit Research said.

"Investors are still prudent about dragging the pair much lower ahead of the ECB meeting next week now that most option barriers have probably been hit."

U.S. data due Friday, including retail sales, industrial production and the University of Michigan consumer sentiment survey, are likely to "keep activity quite choppy and might even spark more profit-taking at the end of a tough week."

ING said the dollar may stabilize around current levels on Friday but it has limited scope for a downward correction with the risks tilted towards further gains in the near-term.

The dollar's safe-haven status means risk aversion will cap any correction while further appreciation may come from the market raising its interest rate rise expectations for the Federal Reserve, ING said.

While there isn't enough reasoning for a 100 basis points rate rise in July, the Fed's Christopher Waller suggested this isn't off the table, and "we cannot exclude that markets may continue to speculate on such prospect."

Bonds:

Italian government bonds were firmer, broadly in line with moves of eurozone peers, after Italy's president rejected Prime Minister Mario Draghi's offer to resign after the Five Star Movement abstained from a key confidence vote.

Citi said a snap election could cause the 10-year BTP-Bund yield spread to widen by 50-70 basis points, while the current coalition with a new prime minister would cause a 20-30bp widening. The spread wouldn't change if Draghi remained as PM.

Draghi will address Parliament next week and "until then [and perhaps after], there will remain a great degree of uncertainty," Citi said.

Read: Italian Political Risk Adds Pressure on ECB to Deliver Anti-Fragmentation Tool

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The European Central Bank's planned antifragmentation tool is expected to focus initially on government bonds, the first stage of monetary-policy transmission, off which all other assets are priced, said BNP Paribas Markets 360. One open question is whether it would be able to buy corporate bonds.

Previously, when the ECB bought corporate bonds under the Corporate Sector Purchase Programme, the backdrop was a generalized easing of the monetary-policy stance being necessary due to excessively low inflation, BNP said.

"Although this time the need is to tighten rather than ease the monetary-policy stance, we think the tool should in principle be able to buy credit."

Energy:

Oil prices maintained modest gains in Europe as concerns about supply tightness countered recession worries, although Fitch said crude's recent declines may be overdone.

It said economic growth should still be robust at around 3% this year and next. Meanwhile, "despite large-scale strategic storage releases and demand-side weakness in China, the market has remained extremely tight."

Fitch expects Brent to average $105 a barrel this year and $100 a barrel in 2023.

Metals:

Copper prices fell below $7.000 a ton, the first time since November 2020, while gold was also a touch lower, as global growth fears continued to hit market sentiment.

Rate hikes in Europe and the U.S. as well as Chinese growth concerns are curtailing demand for metals, said Commonwealth Bank of Australia.

"These global growth fears combined with hawkish U.S. monetary policy is helping drive a surge in the dollar. That's been particularly negative for industrial metals and oil benchmarks in recent weeks," CBA said.

DOW JONES NEWSPLUS


EMEA HEADLINES

Italian Prime Minister Mario Draghi Submits Resignation as Coalition Collapses

Italian Prime Minister Mario Draghi tendered his resignation Thursday after his coalition collapsed because of differences over how to respond to the fallout of the war in Ukraine, leaving the eurozone's third-largest economy in political crisis.

Mr. Draghi said he would resign after a key party in his coalition pulled its support for his government following squabbles among the groups on whether to send arms to Ukraine and how much financial support to give to Italian families reeling from high inflation.


Shell CEO Warns Parts of Europe May Need to Ration Energy

LONDON-Shell Chief Executive Ben van Beurden said Europe may need to ration energy and faces the prospect of sharply escalating prices, as the continent gears up for a "really tough" winter.

Energy prices have soared in Europe, amid tight supplies, booming post lockdown demand and more recently the war in Ukraine. The European Union has agreed to a ban on Russian oil by the end of the year in response to Moscow's invasion of Ukraine, threatening global supply. Russian natural gas flows to Europe, meanwhile, have been curtailed. Moscow says that's due to technical issues, while European governments say Russian President Vladimir Putin is using energy as a weapon.


U.S. Approves Ericsson's $6.2 Billion Vonage Acquisition

Swedish telecom-equipment giant Ericsson AB said the Committee on Foreign Investment in the U.S. had authorized its $6.2 billion proposal to buy Vonage Holdings Corp., clearing the way for the deal to be completed next week.

Ericsson said it now expects to close the merger by Thursday, ahead of its previous forecast of the end of July. A spokesman for the Treasury Department, which leads the Cfius panel, didn't immediately return a request for comment.


Richemont 1Q Sales Surged in Europe, Slumped in China

Compagnie Financiere Richemont SA said Friday that a return of tourism to Europe helped drive double-digit sales growth in the first quarter of its fiscal year, offsetting the negative impact of lockdowns in China.

The Swiss luxury-goods group reported total sales of 5.26 billion euros ($5.27 billion) in the March-June period, rising 12% on year at constant currency from EUR4.4 billion a year earlier. This beat expectations of EUR5.1 billion, according to a poll of analysts' estimates compiled by FactSet.


Rio Tinto Says 2Q Iron-Ore Exports Up, But Cautions on Economic Outlook

Rio Tinto PLC on Friday sounded a cautious note on the global economic outlook, even as it reported a lift in shipments of its flagship product iron ore, the main ingredient in steel.

The Anglo-Australian mining company highlighted concerns about a growing risk of a recession, and said the trade disruptions, food protectionism and energy crisis squeezing supply chains will need to ease significantly before inflation pressures subside.


Aston Martin Lagonda to Raise $772 Mln

Aston Martin Lagonda Global Holdings PLC said Friday that it will raise 653 million pounds ($772.2 million) via a discounted share placing, and that it will use the proceeds to meaningfully deleverage the balance sheet and speed up long-term growth.

The U.K. luxury-car maker said that Saudi Arabia's Public Investment Fund will become a new anchor investor and its second largest shareholder.


MTN Group in Talks to Buy South Africa's Telkom

MTN Group Ltd. said Friday that it is in discussions to buy Telkom SA SOC Ltd. via a stake in the company or a combination of cash and shares.

The South Africa-based telecommunications group said that talks with Telkom, which is also based in South Africa, were at an early stage and there was no certainty that the merger will end up taking place.


Voestalpine Says 1Q Exceeded Expectations

Voestalpine AG said late Thursday that it beat market expectations in the first quarter of its fiscal year 2023, forecasting full-year earnings at the high end of its outlook.

According to preliminary figures, the Austrian steel-products maker generated quarterly revenue of 4.65 billion euros ($4.66 billion). Earnings before interest, taxes, depreciation and amortization were EUR877 million, and earnings before interest and taxes came in at EUR691 million, it said.


EU New Car Registrations Fell to 26-Year Low in June

New car registrations in the European Union fell in June as supply-chain issues continued to hold back vehicle production, according to data published Friday by the European Automobile Manufacturers' Association, the ACEA.

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07-15-22 0520ET