By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets
Big Tech looks to have calmed Wall Street nerves overnight, helping deflect attention from the U.S. economy’s tariff-skewed first quarterly contraction in three years.
In today’s column, I explain why the euro zone’s outperformance against the U.S. in the first quarter may be more than just a flash in the pan.
Now onto the market news.
Today’s market minute
* Ukraine and the U.S. on Wednesday signed a deal heavily promoted by U.S. President Donald Trump that will give the United States preferential access to new Ukrainian minerals deals and fund investment in Ukraine’s reconstruction.
* Microsoft forecast on Wednesday stronger-than-expected quarterly growth for its cloud-computing business Azure after blowout results in the latest quarter, calming investor worries in an uncertain economy and lifting its shares 7% after hours.
* A sliding yen helped push the dollar higher on Thursday as the Bank of Japan lowered growth forecasts in light of U.S. tariffs and left rates on hold.
* Saudi Arabian officials are briefing allies and industry experts to say the kingdom is unwilling to prop up the oil market with further supply cuts and can handle a prolonged period of low prices, five sources with knowledge of the talks said.
* The Trump administration expects to conclude initial tariff deals with some U.S. trading partners within weeks, but negotiations with India are not “finish-line close” and no official talks with China are under way, U.S. Trade Representative Jamieson Greer said on Wednesday.
Tech tonic for stalled economy
Impressive results from U.S. megacaps Microsoft and Meta lifted their shares by 8% and 5%, respectively, ahead of Thursday’s bell, with positive news on cloud computing and artificial intelligence, themes that have recently been overshadowed by tariff news.
Following last week’s beat from Alphabet and with Apple and Amazon due to report late on Thursday, the tech earnings picture has brightened amid the trade war fog, and given a shot in the arm to the wider market.
Nasdaq and S&P 500 futures are up 1-1.5% ahead of today’s bell as a result. The Nasdaq, though still down 10% for the year to date, has clawed back all its losses since President Donald Trump’s April 2 tariff announcement. The S&P500 and ‘Magnificent Seven’ megacap ETFs on Thursday are likely to have also regained the ground lost after “Liberation Day”.
Fittingly on “International Workers Day”, which closed most of Europe’s markets on Thursday, attention is zooming back in on the employment situation and how it is unfolding as the second quarter gets under way.
After a miss on April private sector payrolls from the ADP update on Wednesday, April layoff data and weekly jobless claims are next on the slate before the overall jobs report is released tomorrow. April manufacturing surveys from ISM will also be watched closely for signs of any tariff-related fallout.
Amid the blizzard of economic and corporate reports on Wednesday, the focus was on the negative U.S. GDP print for the first quarter, something that was almost unthinkable at the start of the year.
While the 0.3% contraction was below consensus forecasts for an equally modest expansion, the result was clearly distorted by import stockpiling ahead of tariffs. And it was slightly better than many updated 1Q growth forecasts put out just before the release.
Import surge aside, much of the attention was on the more resilient consumption and production readings, though there is debate about the extent to which these were also flattered by pre-tariff stockpiling.
Some correction of these trade-related distortions is expected in the current quarter, but it remains to be seen how much the actual tariff moves affected behaviour last month or what impact they will have moving forward.
Trump blamed the first quarter GDP hit on distortions and hangovers from the previous administration, even though those distortions were driven mostly by his tariff plans.
However, improving news on trade talks has continued to leak out. A social media account affiliated with Chinese state media claimed the United States had approached China seeking talks over Trump’s 145% bilateral tariffs, potentially signalling Beijing’s openness to negotiations.
And there was some progress on the geopolitical front too as Ukraine and the U.S. finally signed a deal that gives the United States preferential access to new Ukrainian minerals deals and funds investment in Ukraine’s reconstruction.
But the combination of a GDP miss, softer jobs numbers and a benign core inflation reading for March has encouraged Federal Reserve easing bets. Futures are now pricing in just over 100 basis points of rate cuts by yearend, starting about midyear.
As a result, U.S. Treasury yields have slipped back further to three-week lows.
U.S. crude oil prices have also fallen further toward four-year lows around $57 per barrel.
The dollar has crept higher to touch its best level since mid-April, with Japan’s yen falling back sharply as the Bank of Japan left its key interest rates unchanged on Thursday.
Make sure you check out today’s column, which looks at the contrasting fortunes of U.S. and euro zone GDP during the first quarter and considers whether Europe’s rare outperformance will prove durable.
Today’s events to watch
* US April layoffs (7:30EDT), weekly jobless claims (8:30EDT), April manufacturing surveys from S&P Global (0945EDT) and ISM (10:00EDT), March construction spending (10:00EDT)
* May 1 Labor Day holidays across much of Europe and parts of Asia
* U.S. corporate earnings: Apple, Amazon, Eli Lilly, Amgen, Moderna, Airbnb, Ameren, AIG, KKR, Estee Lauder, Mastercard, McDonalds, Howmet, Huntington Ingalls, Mohawk, Hubbell, Hershey, Intercontinental Exchange, Kellanova, Eversource, AMETEK, Biogen, CVS, Consolidated Edison, Linde
The opinions expressed here are those of the author, a columnist for Reuters
(By Mike Dolan; Editing by Anna Szymanski)
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