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Apr 26, 2019

Markets On Friday 26, April 2019 I The Euro’s Bad Year Just Keeps Getting Worse

The Wall Street Journal.
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Happy Friday. I'm Jessica Menton, breaking down the latest in markets as the week winds down. 
Amazon shares are rising in premarket trade after the e-commerce titan posted a fourth straight record profit. Meanwhile, oil giants Exxon Mobil and Chevron will report earnings results shortly, along with American Airlines.
Investors will also get a fresh reading this morning on U.S. economic growth in the first quarter. Heading into the opening bell, the S&P 500 is 1.5% higher for the week while the Dow is mildly lower. 
Plus, our Akane Otani weighs in on what's been driving the euro lower recently. 
 

Markets in a Minute

Markets Data
 

Overnight Developments

 

Euro Hurt by Growth Fears, Political Uncertainty

By Akane Otani, markets reporter
Investors souring on hopes of an economic rebound in the eurozone are taking their bets to the currency market.
The euro is trading at a nearly two-year low against the U.S. dollar, hurt by reports this week showing confidence among businesses in Germany and manufacturers in France both fell in April. The currency is headed for its fifth weekly decline in six weeks, a reflection of the growing skepticism among investors about policymakers’ ability to steer an economic turnaround in Europe.
Data released in the coming days stand to potentially widen the gap between the two currencies.
Economists surveyed by The Wall Street Journal expect the Commerce Department’s initial estimates for first-quarter gross domestic product, released Friday, to show the U.S. economy growing 2.5%, an improvement from the fourth quarter’s 2.2% growth rate. That should reassure investors that U.S. growth prospects have improved after a bumpy start to the year.
In contrast, expectations are more muted for next week’s batch of European data, which includes estimates for French gross domestic product Tuesday, U.K. manufacturing data Wednesday and French and German manufacturing data Thursday. The diverging prospects for growth between the U.S. and Europe have some analysts betting the euro has further room to slide.
“I think the dollar may even break out of [its] range and head higher now,” Mark Grant, managing director and chief global strategist at B. Riley FBR, said in an email, citing the relative strength of the U.S. economy compared to the European economy.
To be sure, the dollar has already run up to levels that some analysts believe is unsustainable.
The WSJ Dollar Index, which tracks the greenback against a basket of 16 currencies, closed Wednesday at its highest level since November. After the rally of the past few months, BlackRock’s global chief investment strategist, Richard Turnill, says he has a neutral outlook on the currency.
“It has perceived ‘safe-haven’ appeal but gains could be limited by a high valuation and a narrowing growth gap with the rest of the world,” Mr. Turnill said in a note. While European data have been uneven, reports have pointed to improving prospects elsewhere around the world, particularly in China. That could take some shine out of the dollar’s rally, in turn offering some relief to the euro.
But others warn that with political risks like Brexit and the upcoming European Union elections remaining, it’s too early to turn optimistic.
Don’t discount the possibility of a “major power shift” in the E.U. sending the dollar higher, Mr. Grant said.

Market Facts

  • The S&P 500 has climbed an average of 13% in the 12 months after snapping a six-month drought without a record, according to an LPL Financial analysis of data going back to 1950. The broad index snapped such a drought on Tuesday.
     
  • Shares of 3M tumbled 13% Thursday, their biggest percentage loss since Black Monday, the stock market crash on Oct. 19, 1987. The manufacturer of Post-its said that China and other big markets are buying fewer products used to make cars and electronics. 3M was the worst performer in the Dow industrials, shaving 192.3 points from the blue-chip index.
     
  • On this day in 1973, the Chicago Board Options Exchange opened for trading with call options available on 16 U.S. common stocks. For the first time, stock options were listed on a dedicated exchange and registered for trading in standardized form, creating a “fair and orderly market.”

Key Events

U.S. gross domestic product is expected to advance 2.5% in the first quarter. The figures will be released at 8:30 a.m. ET.
The University of Michigan consumer-sentiment index for April is expected to tick up to 97.0 from 98.4 at the end of March. The index is released at 10 a.m.
The Baker-Hughes rig count is slated for 1 p.m.
President Trump meets with Japanese Prime Minister Shinzo Abe at the White House. The gathering will focus on trade and North Korea.
 

Must Reads

Uber calibrated downward its target valuation to a range of roughly $80 billion to $90 billion as it readies an initial public offering. PHOTO: KEVIN HAGEN FOR THE WALL STREET JOURNAL
Uber lowered its target IPO valuation again. Uber ratcheted down its target valuation to a range of about $80 billion to $90 billion for its initial public offering, following rival Lyft’s struggles after listing last month.
Deutsche Bank cut its revenue target a day after merger talks failed. Deutsche Bank cut its full-year revenue target to “essentially flat” from 2018 in quarterly results, a day after saying it ended merger talks with smaller rival Commerzbank.
Bitfinex drained Tether to mask missing funds, a probe alleged. The cryptocurrency exchange operated by Hong Kong-based iFinex raided dollar reserves underpinning its popular digital coin Tether to cover up a missing $850 million, the New York attorney general’s office said.
Microsoft hit a $1 trillion market value for the first time. Shares of Microsoft topped the $130.50 value needed to give the company a market value of $1 trillion, joining Apple and Amazon.com as the only U.S. companies to ever reach that mark on an intraday basis.
Elon Musk’s standoff with the SEC over his tweets continues. Elon Musk and the SEC want more time to work out their dispute over whether the Tesla CEO violated a court order restricting his use of social media.
Vanguard is handing over some of its voting power. By the end of the year, firms that manage Vanguard’s active equity funds will be able to cast votes on takeovers, board slates or shareholder proposals affecting the portion of shares they oversee.
 

What We've Heard on the Street

“Sometimes it’s hard to know whether to laugh or cry. Deutsche Bank investors will know this feeling after talks collapsed over a potential merger with domestic rival Commerzbank Thursday.”
—Heard on the Street columnist Paul J. Davies

Stocks to Watch

Amazon.comThe e-commerce company reported its first-quarter profit more than doubled, but its quarterly revenue grew at the slowest pace in nearly four years.
Intel: The company trimmed its financial forecast for this year and said quarterly sales of chips for data centers declined in for the first time in seven years.
Ford: The auto maker's first-quarter operating profit rose 12%, as the company shored up overseas losses and notched sharp gains from the strength of its pickup-truck and sport-utility lineup in the U.S.
Starbucks: The coffee company beat profit expectations during its most recent quarter and boosted forecasts for sales growth this year, rejuvenating sales in its biggest markets.
Mattel: The toy company's sales fell less than anticipated in the latest quarter. 
T-MobileThe No. 3 wireless carrier by subscribers said that its first-quarter profit jumped 35% on the strength of new customer sign-ups.

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