MARKET WRAPS

Watch For:

EU Spring Economic Forecast, Foreign Trade; Germany WPI; updates from Vantage Towers, Aeroports de Paris, Ryanair, Vodacom, AngloGold Ashanti

Opening Call:

Europe will likely track losses in Asia following some weak Chinese economic data. Elsewhere, the dollar steadied, while Treasury yields, oil and gold all edged lower.

Equities:

A mixed picture in Asian stocks, weighed by data showing China's economic activity cooled sharply in April, will likely drag on European markets early Monday.

The Chinese data included below-forecast prints for retail sales and industrial production, as stringent Covid-19 control measures locked down cities and disrupted businesses.

However, in a surprise move to revive the struggling property market, China's central bank cut mortgage-loan interest rates for first-time home buyers by 20 basis points, while keeping the minimum mortgage rates for second-home buyers unchanged.

This Week:

The week ahead includes an appearance by Jerome Powell at the WSJ Future of Everything Festival for a conversation on the future of the U.S. economy. Investors will be looking for more context and clarity on monetary policy as inflation remains elevated and the broader economic environment appears uncertain.

"Powell's appearance [on Tuesday] will attract some attention--but the data docket will do most of the talking this week with all eyes on U.S. retail sales," wrote Stephen Innes, Managing Partner at SPI Asset Management.

"Indeed, investors remain laser-focused on the macro picture, particularly on consumer-based recessionary guidepost."

Stocks to Watch:

India's Adani group has agreed to buy Holcim's cement business in India in a $10.5 billion deal. The transaction, which is subject to regulatory approvals, is expected to close in the second half of this year.

Read more here.

Forex:

The dollar steadied in Asia as risk appetite wavered despite Wall Street's rally Friday.

Westpac said the broader dollar bull trend remained in good shape, however, noting the Fed is still resolutely hawkish while the eurozone is coping with a more acute stagflationary situation and China is battling a Covid-19 outbreak with strict lockdowns.

Capital Economics said the dollar's recent rally could be due for a pause.

Treasury yields' sharp declines despite higher-than-expected inflation readings and hawkish Fed speak implies financial markets appear increasingly driven by fear of an economic slowdown. That's the pattern evident in G10 currencies--the riskier ones fell the furthest last week, and in most cases are at their weakest vs the dollar since mid-2020.

But with big declines by equities and risky currencies over the past few weeks, Capital Economics said it wouldn't be surprised to see a rebound or consolidation period in the near term.

Bonds:

Treasury yields edged lower in Asia after they moved substantially higher Friday, led by gains in 5- through 30-year rates, as investors returned to risk-on mode.

However, 2- and 10-year yields posted their biggest weekly declines since March to end a week of choppy trade.

Investors remained sensitive to remarks by Fed officials. On Friday, Cleveland Fed President Loretta Mester put the possibility of a 75 basis point rate increase back on the table for September, though she said she expects to support 50 basis point rate increases at each of the Fed's next two meetings.

Energy:

Oil futures were lower, reversing opening gains in Asia, as signs of cooling in China's economic growth spurred concerns about demand.

Prices had risen early Monday, helped by optimism about the strength of summer demand in the northern hemisphere. Rystad Energy said the busy travel season of June, July and August will likely boost demand significantly as the need for road and jet fuel accelerates.

Demand for oil to power cooling systems in the Middle East during the "baking" summer months will also probably be boosted, Rystad said.

Metals:

Gold edged a few cents lower, extending Friday's losses, which saw prices settle at their lowest since Feb. 4.

However, gold has tentatively tested the waters below $1,800 and still remains in a danger zone for further downside, said OANDA. Any decent rebound in the precious metal might fade, with sellers probably emerging well before the $1,840 level.

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Aluminum jumped almost 1.5% as Shanghai begins allowing businesses to reopen on a limited basis.

Demand is likely to be supported by the transport and electrical sectors, said CBA. The substitution of steel with lightweight aluminum in the transport sector to boost the fuel efficiency of lighter vehicles has been a driver of aluminum demand.

For the electrical sector, demand is underpinned by the increase in renewable generation along with the expansion of power transmission and distribution capacity.

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Iron-ore prices rose 1% in China on the easing of some Covid-19 curbs in Shanghai and CBA said Chinese policy remains pivotal to the demand outlook for the metal.

Policy makers are also seeking to boost infrastructure investment and stabilize the property sector this year, with infrastructure and property construction each accounting for roughly 30% of China's steel demand.

TODAY'S TOP HEADLINES

China's Economic Activity Cooled Sharply in April

BEIJING-China's economic activity cooled sharply in April, official data showed Monday, as the stringent Covid-19 control measures locked down cities and disrupted businesses.

Retail sales, a gauge of China's consumption, fell 11.1% on year in April, widening from a drop of 3.5% in March, the National Bureau of Statistics said. The result was also much lower than the 5.4% decline expected by economists polled by The Wall Street Journal.

China PBOC Cuts Mortgage Rate Lower Limit for First-Home Buyers

China's central bank cut the lower limit on mortgage rates for first-home buyers, a move that could revive the property market and support the cooling economy.

The People's Bank of China said Sunday that it would allow commercial banks to reduce their mortgage rates by up to 20 basis points from the current floors, while keeping the minimum mortgage rates for second-home buyers unchanged.

Investors Stay Put, Because They Can't Think of Better Options

Even the worst markets are supposed to have havens. Some unnerved investors are wondering if this one doesn't.

The S&P 500 is down 16%, its worst start to a year since 1970, according to Dow Jones Market Data. But assets of all kinds are also falling. Gold, typically considered a haven, has swung into the red. Bonds are typically another shelter, but this year they are falling alongside stocks, an unusual tandem that reflects investors' uncertainty.

Rising Food Prices Roil Developing World

Soaring food prices are triggering shortages and protests across the developing world as disruption from the Ukraine war adds to existing strains on global supplies of grains, meat and other foodstuffs.

India on Saturday invoked a rare ban on wheat exports to help tame domestic prices, a move likely to exacerbate global strains. The country is the world's second-largest wheat grower, behind China. Late last month, Indonesia halted the export of certain types of palm oil in an effort to lower soaring prices of cooking oil at home.

Individual Investors Step Back From Options Bets

Options trading by individual investors is fading, the latest sign that the stock market's speculative fever has broken.

Those individual investors had embraced options as a way of riding the stock market's momentum that drove shares of companies from Apple Inc. to Nvidia Corp. to new heights. Now, the Federal Reserve's move to raise interest rates to tame inflation has thrown that dynamic into reverse, sending the prices of stocks skidding.

Stocks Are Way Down. They're Still Expensive.

U.S. stocks are off to their worst start to a year in more than a half-century. By some measures, they still look expensive.

Wall Street often uses the ratio of a company's share price to its earnings as a measuring stick for whether a stock appears cheap or pricey. By that metric, the market as a whole had been unusually expensive for much of the past two years, a period when especially easy monetary policy turbocharged the popular view that low interest rates gave investors few alternatives to stocks.

India Bans Wheat Exports, Putting More Pressure on Global Food Supplies

NEW DELHI-India said it would ban wheat exports, in a move that will add to global inflationary pressure and further strain global food supplies that have been disrupted by the war in Ukraine.

"The food security of India, neighboring and other vulnerable countries is at risk," India's Directorate General of Foreign Trade said in a notice on Friday explaining the ban.

Loretta Mester Says Fed Is On Track for Aggressive Rate Rises

Federal Reserve Bank of Cleveland President Loretta Mester said the U.S. central bank needs to press forward with aggressive rate rises, and that by early fall it may be able to take stock of whether it can slow down or will need to speed up the process of removing support from the economy.

"Given economic conditions, ongoing increases in the fed-funds rate are called for, and unless there are some big surprises, I expect it to be appropriate to raise the policy rate another 50 basis points at each of our next two meetings," Ms. Mester said in a Friday speech text.

Saudi Aramco Posts Record Quarterly Profit on Surging Oil Prices

DUBAI-Saudi Arabia's national oil company said Sunday that its net income rose more than 80% to record highs in the first quarter of the year, a surge that shows how some of the world's biggest state-owned energy producers are benefitting from a price boom accelerated by Russia's invasion of Ukraine.

Saudi Arabian Oil Co., known as Aramco, said its quarterly profit swelled to $39.5 billion in the quarter, a period during which Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, continued to rebuff U.S. requests to pump more oil to help tame surging crude prices, instead sticking by an agreement with Russia to only marginally increase output.

Finland Plans Next Step in NATO Bid as Ukraine Mounts Counteroffensive Near Key Eastern City

KYIV, Ukraine-Finland said Sunday it would seek parliamentary approval to join NATO as Kyiv's forces began a counteroffensive toward the eastern city of Izyum, which Ukrainian officials said was aimed at disrupting Russian supply lines into the Donbas region.

Finnish President Sauli Niinistö said the government would apply for membership in the North Atlantic Treaty Organization subject to approval by parliament, which is widely expected, in the coming days.

UK Housing Market Sentiment Is Positive Despite Stabilization Signs

The U.K. housing market showed signs of stabilizing in April following two years of frenzied activity, however buyer and seller confidence remained high, according to new data from OnTheMarket PLC.

Measuring more than 120,000 consumer responses, the property sentiment index found around 76% of active buyers and 82% of sellers were confident they would carry out a property transaction within the next three months, in line with figures reported in February and March, the online property portal said.

Adani Group to Buy Holcim's India Cement Business in $10.5 Billion Deal

One of India's largest business groups has agreed to buy Holcim Ltd.'s cement business in India, in a $10.5 billion deal that is biggest ever acquisition in the country's infrastructure and materials industry.

The Adani Group will buy Switzerland-based Holcim's stake in Indian listed companies Ambuja Cements Ltd. and ACC Ltd., which will make Adani India's second-largest cement maker, Adani Group said Sunday.

Russian Invasion Intensifies Role of New U.S.-EU Tech Council

A new forum for the U.S. and European Union to settle differences on trade and technology policy has taken on added significance following Russia's invasion of Ukraine, with supporters positioning it as a model for broader cooperation among free-market democracies.

Nations Aim to Secure Supply Chains by Turning Offshoring Into 'Friend-Shoring'

WASHINGTON-As war and the pandemic expose the fragility of supply chains, the U.S. and its allies are pursuing a new kind of global trade, one that confines commerce to a circle of trusted nations. Fans call the shift "friend-shoring."

The new strategy is a departure from economic globalization of recent decades, when businesses bought and made products where costs were low and free-trade policies made moving goods around the world cheaper and faster.

Yellen Seeks to Win European Support for a Tax Deal Congress Hasn't Approved

WASHINGTON-Treasury Secretary Janet Yellen wants to clinch the European Union's approval of a global minimum tax on the profits of large corporations, hoping to smooth out Poland's objections to approving the plan in meetings next week.

But the larger threat to the agreement's future may rest closer to home, in Congress, which hasn't yet approved the plan Ms. Yellen negotiated.

Why It's So Hard to Keep Russian Diamonds and Gold Out of the U.S. Despite Sanctions

Russian gold and diamonds could still be sold in the U.S. despite being sanctioned, lawmakers and industry participants say, unless companies and governments tighten their controls.

In theory, U.S. and European sanctions have outlawed the sale of gold and diamonds from Russia. In practice, Russian gems and precious metals are likely still entering Western markets, these people say, often via a hard-to-police global web of middlemen.

Write to paul.larkins@dowjones.com

Expected Major Events for Monday

06:00/GER: Apr WPI

06:00/NOR: Apr External trade in goods

07:00/TUR: Mar Balance of Payments

07:00/SVK: Mar New orders in industry

07:00/CZE: Apr PPI

09:00/CRO: Apr CPI

09:00/EU: Mar Foreign trade

10:00/IRL: Mar Goods Exports and Imports

15:59/UKR: Mar Trade

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

(END) Dow Jones Newswires

May 16, 2022 00:28 ET (04:28 GMT)