UKX FTSE 100 Index

MARKET WRAPS

Stocks:

European stocks traded mixed on Friday, as sentiment remained fragile over concerns that the U.S. debt ceiling deadline is fast approaching and with a Federal Reserve rate rise next month looking increasingly likely.

"While there is some progress, with the two sides in Washington now down to arguing over the last $70 billion, it is still debatable whether lawmakers can pull off a deal before June 1," IG said.

In the U.K., retailers edged higher after data showed U.K. retail sales rose slightly more than expected in April.

Read UK Retailers Look to Improving Outlook on Switch to Summer Spending

U.S. Markets: Markets:

Stock futures were treading water after the House of Representatives left for a weekend recess with some progress but no deal in place to raise the debt ceiling.

Money managers said they took some comfort from signs that negotiators were narrowing their differences. Still, they feared that failure to strike a deal could lead to turmoil in financial markets, many of which revolve around Treasury trading, and accelerate the onset of a possible recession.

Treasurys prices edged higher, with the yield on 10-year notes falling to 3.7973, from 3.814% on Thursday.

Stocks on the Move

Chip maker Marvell forecast substantial growth, due in part to artificial intelligence. Its stock rose nearly 17% in off-hours trading.

Cloud-software company Workday reported better-than-expected quarterly results and lifted its outlook. The stock gained nearly 9% outside of regular trading hours.

Coming up

Investors will parse U.S. data on personal consumption expenditure, including an inflation gauge favored by the Fed.

Follow WSJ markets coverage here .

Forex:

The euro has been on a downward trend against the dollar since the European Central Bank's May 4 meeting and is vulnerable to further falls, SEB said.

Its short-term fair-value model suggests current levels are fair, but positioning data indicates that broad speculators are sitting on the longest EUR/USD position since October 2020.

"There is little probability for a correction higher and rather that downscaling of the long EUR/USD position should be expected to add another downside factor."

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The dollar edged lower in Europe on signs of progress among U.S. lawmakers on raising the debt ceiling, albeit still without a deal in place.

"The mood music is slightly better on the U.S. debt ceiling - but next week will be crucial," ING said.

However, with expectations growing the Fed will raise interest rates again, the dollar could get a boost later as U.S. core PCE deflator data will likely give more evidence of core inflation not falling as quickly as the Fed would like, ING said.

Read Dollar Falls Are Limited Due to US Rate-Rise Prospects

Bonds:

Eurozone bond yields are expected to move sideways in volatile trade near term, SEB said.

"We think that it will be volatile and lack a trend in the coming weeks with its prospective direction decided by inflation and growth data, and the general risk sentiment."

Lately, 10-year German Bund yields have reached 2.45%, SEB's target for the second quarter.

"With prospects of the European Central Bank pricing becoming even more hawkish, the curve may struggle to enter a long-term steepening trend just yet," SEB said.

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With rating risks off the table and continuing support from domestic investors prevailing, Societe Generale said it sees value in Italian government bonds versus German Bunds for carry.

"Wider credit spreads in late 2023 and the next round of ratings review can put some pressure on BTPs, but we are not there yet," SG said.

It still sees a rangy BTP-Bund spread and continue overweighting BTPs for carry.

SG also reiterated its pessimistic view on the 10-year French OAT-German Bund yield spread with rating downgrade risks looming.

"We remain bearish on the 10y OAT-Bund spread, especially now with the 2 June downgrade risk on France that could be a wakeup call for the markets."

S&P, which assigned a negative outlook on France in December 2022, has another scheduled review on June 2.

Read Post-Election Rally in Greek Bonds Is Remarkable, Commerzbank Says

Energy:

Oil prices wavered having tumbled on Thursday after comments from Russia's deputy prime minister scrambled investors' expectations for OPEC+ plans. Also in focus are the U.S. debt ceiling talks.

"The debt ceiling talks debacle that have gone into overtime is raising concerns of a default. These concerns have misdirected the oil market focus from the lurking supply shortage that may end up doing more damage to the economy than a default by the United States," The Price Futures Group said.

Metals:

Base metals and gold moved higher as expectations rise that an agreement on the U.S. debt ceiling is on the horizon.

"The newsflow has been a lot more positive for markets over the last 24 hours," Deutsche Bank said.

Improvement in sentiment over the debt ceiling, plus positive economic data from the U.S. such as lower jobless claims last month is helping to boost the macro mood, Deutsche Bank said.

"However, investors are once again dialing up their expectations for future rate hikes" as the optimism grows.

China Steel

China's steel market is the softest it has been for some time, but is expected to improve later this year, according to steelmaking coal producer Coronado Global Resources. "At the moment [it's] very quiet."

World Steel Association data this week showed a 1.5% fall in China's April crude-steel output on year. "We actually see in the second half infrastructure investments coming back, even property investments coming back, car production picking up, so the demand for steel will pick up and therefore also the demand for met coal out of China," Coronado said.

Indian coal demand has, on the other hand, been very strong, it said, adding that "we have no issues selling our coal."

DOW JONES NEWSPLUS

EMEA HEADLINES

Russian Airstrikes Set Homes Ablaze in Ukraine

Russia launched a broad salvo of missile and drone strikes across Ukraine ahead of a widely-anticipated Ukrainian offensive, setting fire to civilian homes and testing the country's air defenses which have been bolstered by a recent influx of Western-supplied weapons systems.

The Ukrainian air force said it shot down 17 missiles and 31 drones fired across the country overnight, including at cities in southern and eastern Ukraine and the capital, Kyiv.

UK Retail Sales Rose 0.5% in April After Rain-Hit March

U.K. retail sales rebounded more than expected on month in April, recovering from a rain-hit March that affected non-food sales, with easing energy prices also lifting some of the pressure on household spending.

Retail-sales volumes ticked up 0.5% on month, compared with a downwardly revised fall of 1.2% in March, data from the Office for National Statistics showed Friday.

Record $279 Million Whistleblower Award Went to a Tipster on Ericsson

The record $279 million whistleblower award issued by the Securities and Exchange Commission earlier this month stemmed from a bribery case against telecommunications company Ericsson.

The award from the SEC's cash-for-tips program was related to the $1.1 billion settlement the Swedish company reached with U.S. authorities in 2019 over allegations it conspired to make illegal payments to win business in five countries, in violation of U.S. antibribery laws, according to people familiar with the matter.

ProSiebenSat.1 Shares Recover From Earlier Losses After 1Q Advertising Weakness

0905 GMT - ProSiebenSat.1 Media flagging signs of improvement in advertising bookings in June is encouraging, but more is needed for its full-year guidance to be achieved, Citi analysts say in a note. The German media company confirmed its 2023 outlook alongside first-quarter results, which doesn't surprise given that its guidance was issued less than a month ago, Citi says. However, the outlook comes with the caveat that it requires a significant economic and advertising recovery in the second half, which will seem too optimistic an assumption for many investors, Citi says. "The good news, though, is that trends appear to be improving from June, the [year-earlier comparatives] ease substantially and consensus expectations are toward the low end of the [full-year] range," Citi says. (adria.calatayud@dowjones.com)

Lufthansa Buys Minority Stake in ITA Airways

Germany's Deutsche Lufthansa said it had reached an agreement with the Italian Ministry of Economy and Finance to acquire a 41% stake in ITA Airways, the Italian carrier formerly known as Alitalia, building on its exposure to what Lufthansa called the third-largest airline market in Europe.

The German carrier group said Thursday that it would inject 325 million euros ($349.4 million) into ITA to buy the stake, with the Italian government pledging a further EUR250 million. The deal, which is subject to regulatory approvals, enables Lufthansa to increase its stake in the carrier or even acquire it outright, making ITA's purchase price dependent on the achievement of jointly agreed targets for net debt and earnings.

Casino Opens Legal Talks With Creditors; To Sell Stores to Intermarche

Casino Guichard-Perrachon said Friday that it has agreed to sell of a number of stores to a competitor, and has opened a conciliation procedure with its creditors.

The French grocer, which has struggled with heavy debts and eroding market share in its home country, said the conciliation procedure will begin under the instruction of the commercial court in Paris, and with the agreement of its creditors and bondholders.

Credit Suisse Loses Case Against Georgian Businessman in Singapore

A Singapore court has ordered a unit of Credit Suisse Group to compensate Georgian businessman Bidzina Ivanishvili for its failure in safeguarding the plaintiff's assets.

"It is noted that the Defendant (Credit Suisse) has admitted that it was in breach of its duty to the plaintiffs to safeguard the Trust assets by 31 December 2008," the judgment posted on the Singapore International Commercial Court's website showed Friday.

Did Merkel Pave the Way for the War in Ukraine?

Dressed in an imperial purple blazer, Angela Merkel beamed at a ceremony in April as she received Germany's highest honor, recognizing the achievements of her 16-year chancellorship. It was her first appearance on a live broadcast since leaving office more than a year ago. She was at peace with herself, she said. She now had time to indulge her long-standing interest in the Renaissance, and though politics had the reputation of being a "snake pit," she added, she could recall joyful moments from her time in power.

For any other leader, receiving the Grand Cross of the Order of Merit at Berlin's understated Bellevue Palace would have marked the crowning of a legacy. Only two other people had previously received the honor: Konrad Adenauer, the first post-World War II chancellor, and Helmut Kohl, Merkel's own mentor.

GLOBAL NEWS

Municipal Bond Issuers on Edge as Debt Ceiling Deadline Nears

A Utah city's plan to issue about $15 million in bonds to fund a new parking structure has officials fixated on the fast-approaching deadline to raise the U.S. debt ceiling. The fear: A default could upend the bond market.

"The cost will skyrocket for us, and financing could become unattainable, " said Mark Shepherd, mayor of Clearfield, about 30 miles north of Salt Lake City.

U.S. Regulator Vows Tough Line on Problem Banks

Large U.S. banks found to have consistently poor risk management and other failings will face more heavy-handed government intervention, including demands to shore up capital or exit lines of business.

A policy unveiled Thursday creates a new set of guardrails targeting complex banks that fail to fix "persistent weaknesses," said Michael Hsu, head of one of the nation's top banking regulators, the Office of the Comptroller of the Currency.

Chip Companies, Wary of Break With China, Seek Looser Limits on Federal Cash

WASHINGTON-Businesses are pressing the federal government to ease conditions on aid for the semiconductor industry, warning that proposed limits on a grant program and tax credit will make it harder for U.S. companies to compete with their Chinese counterparts and develop new technology.

The companies are trying to shape the implementation of last year's Chips and Science Act, which authorized tax credits and $53 billion of spending in a concerted government effort to use public funding to revive the U.S. semiconductor industry.

Pressure Mounts for U.S. Response After China's Micron Ban

Commerce Secretary Gina Raimondo and her Chinese counterpart held a pivotal meeting on U.S.-China ties as pressure was building on the Biden administration to respond to Beijing's blacklisting of the U.S. semiconductor maker Micron Technology.

Any retaliation by the U.S. over Micron carries the risk of setting back a fragile rapprochement after months of bruising acrimony. Raimondo's dinnertime meeting Thursday with Chinese Commerce Minister Wang Wentao was the latest in a series of high-level talks intended to restart dialogue and the first one to take place in Washington.

North Dakota Gov. Doug Burgum Poised to Enter GOP Presidential Race

North Dakota Gov. Doug Burgum is poised to enter the Republican presidential nomination race and is planning a June 7 event in Fargo, N.D., to make a major announcement, sources familiar with his plans told The Wall Street Journal.

The wealthy former software entrepreneur from a heavily Republican state is expected to join a rapidly expanding GOP field that added two entrants, Sen. Tim Scott of South Carolina and Florida Gov. Ron DeSantis, this week.

China Hack Is Latest Challenge for West's Diplomatic Reset With Beijing

The U.S. and its closest allies said Chinese hackers are targeting critical infrastructure using a novel method that is difficult to detect, sounding an alarm that could be a hurdle to recent efforts to improve ties between Beijing and the West.

Cybersecurity agencies in the U.S., the U.K., Canada, Australia and New Zealand-an intelligence-sharing group of countries known as the Five Eyes-said a Chinese state-sponsored actor is employing a tactic known as "living off the land," which involves using built-in network administration tools to gain access to systems. The activity blends in with normal Windows system activities, allowing the actor to evade detection.

DeSantis Presidential Campaign Looks to Rebound After Botched Twitter Announcement

Ron DeSantis is already looking for a reboot.

After a disastrous launch event on Twitter Spaces Wednesday night, the Florida governor's 2024 presidential campaign got a quick start Thursday in trying to move on by announcing an aggressive travel schedule to early primary voting states while the candidate did interviews with conservative radio hosts and appeared before a large group of fundraisers in Miami.

Write to paul.larkins@dowjones.com

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

May 26, 2023 05:43 ET (09:43 GMT)

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