North American Morning Briefing: Traders Await Key Inflation Gauge

MARKET WRAPS

Watch For:

Personal Income and Outlays; Chicago Business Barometer; University of Michigan Final Consumer Survey for March; Canada GDP for January; speeches by Fed's Williams, Cook; speech by ECB's Lagarde

Today's Headlines/Must Reads

Trump's Indictment Spells Trouble for the U.S. Stock Market and the Economy

The Debt Ceiling Is Forgotten, but Not Gone

Markets' Wild Quarter Might Foretell Further Turbulence

Banks Turn to Federal Home Loan Bank Funding as System Faces Review

Spending Report to Show Whether Strength Continued in February

Bond Rally at Risk as Bank Stress Diminishes

Green Energy Is Stuck at a Financial Red Light

Follow WSJ markets coverage here .

Opening Call:

Stock futures appeared to dismiss the news of Donald Trump's indictment, as Wall Street turned its attention to the release of the Federal Reserve's preferred inflation measure.

Trump's indictment by a New York grand jury might create additional uncertainty in the coming weeks if it leads to political deadlock. On the other hand, investors may ignore political news, focusing instead on things like consumer prices that will impact the Fed.

Equities have bounced this week as fears about the banking sector have subsided. Data released after the close on Thursday showed less usage of Fed lending facilities, and flows to money-market funds over the past week eased to a still large $66 billion.

The PCE price index is due for release alongside the latest numbers on consumer spending and personal income. Economists polled by The Wall Street Journal expect the core measure of PCE, which excludes energy and food, to rise 0.4% for February after 0.6% growth in January.

"It's no secret that the FOMC watches this particular data set more closely than most when it comes to inflation gauges, and if we see a softer reading, I expect markets would see this is a signal to continue with the risk-on theme [on heightening expectations of a Fed pause on rates]," Kohle Capital Markets said.

Overseas

Global markets were muted on Friday. The Stoxx Europe 600 edged up 0.2%, keeping it on track to rise more than 7% for the quarter. China's Shanghai Composite index rose 0.4% and Japan's Nikkei 225 gained 0.9%.

Core inflation in the eurozone hit a record in March, a setback for central bankers whose rapid rate rises have exacerbated financial sector strains and caused pains in part of the bloc's economy without yet reining in prices. Read more here .

Stocks to Watch

BlackBerry fell 5% in premarket trading after fiscal fourth-quarter revenue fell from a year earlier and missed analysts' expectations. Cybersecurity revenue in the quarter was $88 million. BlackBerry reiterated that the cybersecurity business saw the "timing of a number of large government deals slip into later quarters" but said it was "confident" they would close during the current fiscal year.

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Metropolitan Bank said it remains well capitalized after seeing its stock fall nearly 28% during the regular trading session on Thursday. The stock rose 19% in after-hours trading.

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Nikola was down 9% in premarket trading after announcing it would sell $100 million of stock at $1.12 a share.

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Rumble rose 14% and Digital World Acquisition jumped 11% in premarket trading, with shares higher following the indictment of Donald Trump.

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Tesla is expected to release deliveries numbers for the first quarter over the weekend. According to 10 estimates compiled by FactSet, Wall Street expects the electric-vehicle company to have delivered 432,000 units in the first quarter, up from about 405,000 in the fourth quarter of 2022. In the first quarter of 2022, Tesla delivered about 310,000 vehicles. Tesla stock was slightly higher in premarket trading.

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Virgin Orbit fell 49% in premarket trading to about 17 cents after the space launch startup said it would cut 85% of its workforce. The job cuts were made "in light of the company's inability to secure meaningful funding," according to a regulatory filing.

Forex:

The dollar edged higher after earlier losses as investors awaited the release of February's PCE data.

"Barring a major upside surprise, we don't expect a material impact on the dollar from PCE data today," ING said.

As evidenced recently, higher chances of the Fed lifting rates in May don't automatically translate into a stronger dollar in the current market environment, it said.

The dollar may stabilize after a week of losses but the short-term bias remains negative for the currency, ING added.

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The euro could rise if eurozone inflation data show underlying price pressures remained elevated in March, particularly after German inflation data eased by less than expected, UniCredit Research said.

That, combined with a potential mix of sluggish personal income and spending data along with steady personal consumption expenditures price index figures, could help EUR/USD end the week on "quite a firm footing, " UniCredit added.

"EUR/USD has the potential to definitively break above the past peak of 1.0930 and then re-approach the year-to-date high of 1.1033."

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Sterling is set to be the best performing currency of the first quarter, boosted by an improved economic outlook and expectations the Bank of England will raise interest rates further despite recent financial turmoil, ING said.

BOE Governor Andrew Bailey on Monday largely endorsed market pricing, although it's unlikely that upcoming economic data will underpin the need for additional rate rises, ING said.

"This morning's revision of fourth-quarter GDP data on the strong side is probably too outdated to have a material impact in this sense."

Read U.K. Economy Avoids Recession with Modest Growth

Bonds:

In anticipation of an end to the recent interest-rate rises, broker positioning monitors indicate that investors have moved toward a more defensive stance and started to add duration and steepeners to portfolios, J.P.Morgan Asset Management said.

While investors are searching for indicators that the acute phase of stress has cooled down, volatility remains high, JPM added.

"With the market still making up its mind on what's to come, we think that volatility is here to stay," JPM said, positioning for a recession, and making use of backups in yields to add duration to portfolios.

The MOVE index, which reflects rate volatility, is currently at levels only seen in 2020 and not far from levels experienced in the global financial crisis in 2008, JPM said.

Energy:

Oil prices ticked lower ahead of the PCE data, which is expected to show price pressures eased month on month but remained steady on year.

A stronger-than-expected reading could raise concerns the Fed will need to keep monetary policy tighter for longer.

Metals:

Base metals were mixed with gold slightly firmer, with markets having taken a breather this week following price whipsaws for much of the month triggered by banking turmoil.

Peak Trading Research said Friday's PCE outcome "will provide clues as to whether the Fed can pause [rate hikes] in May."

Copper

Low inventories of copper in LME warehouses and growing demand from China are likely to boost prices this year, Fitch said, lifting its annual price forecast for 2023 to $9,000 a metric ton from $8,500.

Rising demand from China as the country emerges from Covid-19 lockdowns and a weaker dollar are likely to act as tailwinds for copper, Fitch said. This, added to the fact that LME warehouse inventories are sitting at multi-year lows, means prices should remain elevated.

That said, countries slipping into recession and jitters around banking are likely to cap prices, Fitch said.

TODAY'S TOP HEADLINES

JD.com's Property and Industrial Units Seek About $1 Billion Each in Hong Kong IPOs

JD.com Inc.'s property and industrials units are targeting to raise about $1 billion each in Hong Kong initial public offerings, people familiar with the matter said, adding to the supply of potentially sizable deals that could hit the market this year.

The Chinese e-commerce giant said on Thursday that it is planning to spin off Jingdong Property Inc. and Jingdong Industrials Inc. by listing both companies in the city.

Pro Take: Retail Investors Flee Bed Bath & Beyond When It Needs Them Most

Bed Bath & Beyond Inc.'s plans to sell up to $300 million in shares on the open market got more difficult Thursday as the retail investors it is relying on fled the stock.

Shares reacted to the dilutive new offering, dropping 26% as stockholders-including the company's meme-stock believers-questioned whether it has enough intrinsic value to support a capital raise many times larger than its current market value.

Ford Raises Price Again on Electric F-150 Lightning Truck

Ford Motor Co. has again raised the starting price of its all-electric F-150 Lightning truck, after temporarily halting production and shipments to address a battery issue.

The cheapest of the company's electric trucks now costs $59,974, marking the latest in a series of price increases since the full-size, battery-powered pickup trucks began rolling off Detroit assembly lines in April of last year. At that time, the starting price was roughly $40,000. By August, it had jumped to $46,974. In October, Ford executives raised it to $51,974, and in December, it increased to $56,000.

Virgin Orbit Holdings to Cut Workforce by 85%

Virgin Orbit Holdings Inc. on Thursday said it reduced its headcount by about 675 employees, about 85% of its workforce, to reduce expenses as it has been unable to secure meaningful funding.

Shares nosedived 39% to 21 cents in after-hours trading.

How Trump's Indictment Spells Trouble for Stocks and the Economy

Former President Donald Trump's indictment by a New York grand jury is one more reason that Congress, which desperately needs to compromise, will have a tough time doing so. And that could spell trouble for the U.S. stock market and economy.

On its own, Trump's indictment might not seem like much of an issue for the stock market. It comes, however, at a fraught moment. A compromise between the U.S. and Democrats and Republicans on the debt ceiling was never going to be easy. There are just too many differences between the parties-some over how government money should be spent, others simply due to political animus. But the decision to indict the man who is effectively the face of the GOP for many in the party suggests that a middle ground will be even harder to find.

The Debt Ceiling Is Forgotten, but Not Gone. It Could Still Slam Stocks.

The debt ceiling has been forgotten amid the banking turmoil, but it has the potential to cause chaos of its own.

The U.S. federal government hit its self-imposed debt limit of just under $31.4 trillion in January, and Congress appears to be barreling toward a protracted fight over lifting it in the coming months-or else risk a disastrous first-ever U.S. default. Markets have taken notice, but they don't appear overly concerned just yet.

Wild Quarter for Markets Might Foretell Further Turbulence

Markets showed their resilience in the first quarter, despite being rocked by shock waves that few anticipated.

Investors began the year feeling largely upbeat. Inflation appeared to be subsiding, and many bet that would lead the Federal Reserve to switch quickly from raising interest rates to cutting them.

Pro Take: Banks Turn to Federal Home Loan Bank Funding as System Faces Review

When banks run into distress, they have a go-to source for emergency funds other than the Federal Reserve's discount window: the little-known Federal Home Loan Bank system.

Silicon Valley Bank and First Republic Bank both turned to the federally chartered banking system in the months before concerns about their falling deposit levels burst into the headlines in March. The two California-based banks, one seized by regulators and the other partly rescued by large banks, were the biggest borrowers at the Federal Home Loan Bank of San Francisco at the end of 2022, according to a San Francisco FHLB regulatory filing.

Consumer Spending Report to Show Whether Strength Continued in February

A government report Friday will offer insight into how the U.S. economy fared in February, as elevated inflation continued to weigh on consumer purchasing power and interest rates remained high.

The Commerce Department will release February figures on household spending, income and saving, alongside the Federal Reserve's preferred inflation gauge, at 8:30 a.m. Eastern time. The figures won't reflect any impact on consumer spending from banking industry turmoil, which emerged in March.

Bond Rally at Risk as Bank Stress Diminishes

The sharpest rally for U.S. government debt in years has left investors and analysts warning that bond markets are vulnerable to a reversal.

Prices for Treasurys leapt after turmoil in the financial sector drove investors to lower their expectations for how high the Federal Reserve would raise interest rates. Now, some worry that with banks stabilizing, a resumption of the Fed's inflation-fighting efforts could spark declines as rapid as the rally.

Green Energy Is Stuck at a Financial Red Light

After years of uncertainty, last year's Inflation Reduction Act finally gave America's renewable-energy industry a long, green signal. Now the economy is blocking the road.

The wind and solar industries have always suffered from the short-term nature of subsidies, with federal tax credits often extended in nail-biting one-year increments. Last year's climate bill changed that, giving the industry subsidies that last at least a decade. But just as policy winds blow in their favor, two critical growth drivers-interest rates and equipment costs-are moving in the wrong direction.

Eurozone Core Inflation Hits Record High

Core inflation in the eurozone hit a record in March, a setback for central bankers whose rapid interest-rate rises have exacerbated financial sector strains and caused pains in part of the bloc's economy.

The fresh data increases the likelihood that the European Central Bank will raise its key rate again in May. It could also encourage other policy makers to explore alternative ways to cool prices rises, by targeting excessive profiteering by companies or inflationary wage increases.

China's Consumers Extend Economic Rebound From Pandemic

SINGAPORE-A gauge of activity in China's services sector reached its highest level in more than a decade in March, a sign that Chinese consumers are heading back to stores and restaurants, powering an economic recovery following the end of almost three years of strict Covid-19 controls.

The reading represents a promising signal for the global economy, which is depending on Chinese consumers to prop up growth this year as their counterparts in the U.S. and Europe battle rising interest rates, high inflation and the prospect of a squeeze on lending following turmoil in the banking sector.

Japan Restricts Semiconductor-Equipment Exports as Ties With China Chill

TOKYO-Japan said it would restrict the export of advanced semiconductor equipment, a measure that could hamper development of China's industry and marks a further cooling of relations after the detention of a Japanese pharmaceutical-company employee in Beijing.

Foreign Minister Yoshimasa Hayashi will visit Beijing Saturday to meet with his Chinese counterpart, the Japanese government said Friday. It didn't disclose the purpose of the visit, the first by a Japanese foreign minister to China since December 2019, but Tokyo has called for the quick release of the detained Japanese man.

Glynn's Take: RBA Set to Announce a Rates Pause, But Keep Hawkish Bias

SYDNEY-The Reserve Bank of Australia looks set to keep interest rates on hold at its policy meeting on Tuesday, but any pause in its nearly yearlong campaign of aggressive hikes will be laced with a hawkish reminder that the central bank isn't finished tapping the policy brakes just yet.

With 350 basis points of hikes delivered since May, the central bank appears set to step to the sidelines to assess the fallout of those increases, in the knowledge that lags in the transmission of tighter policy settings can be significant.

UK Economy Expanded More Than First Anticipated in Fourth Quarter

The U.K. economy expanded slightly in the fourth quarter, a stronger performance than previously anticipated, though it remains smaller than its size before the pandemic as elevated inflation and high interest rates hit economic activity.

Gross domestic product grew 0.1% from October to December compared with the previous three-month period, in comparison with the stagnation previously estimated in February, according to data from the Office for National Statistics released Friday.

U.K. Joins Trans-Pacific Partnership as It Seeks to Diversify International Commerce

The U.K. government said it had struck a deal to join the Pacific trade alliance the U.S. exited under former President Donald Trump, as Britain looks to diversify trade away from Europe after Brexit.

The U.K. will become the first European country to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as the TPP. The club of 11 countries largely spans the Indo-Pacific region and includes nations such as Japan, Canada, Chile and Vietnam.

Assets in money-market funds touch new $5.2 trillion record, ICI says

Investors hunting for yield in cash-like investments poured another $66 billion into money-market funds this week, bringing total assets to a record $5.2 trillion, according to the Investment Company Institute.

The bulk of the weekly inflows, at $71 billion, went into government funds, which invest in cash, Treasury securities and government-backed debt, according to the weekly ICI data through March 29.

New Listing Rules Give Chinese Companies Clarity, Opportunity

Chinese companies seeking to sell shares abroad will have to juggle key rule changes from Friday, after the country's regulators extended their oversight of overseas listings and Hong Kong's stock exchange launched new rules designed to attract high-growth companies.

Here are those rules and what they mean for listings.

Donald Trump Indictment Sets Historical Marker

A Manhattan grand jury's indictment of former President Donald Trump represents an extraordinary moment for America: the first time a former U.S. president has ever been charged with criminal wrongdoing.

Other presidents have been impeached or left office in disgrace under the shadow of scandal or criminal suspicion. But none of the other men who previously occupied the nation's highest office ever found themselves in the legal jeopardy that now imperils Mr. Trump.

Grand Jury Votes to Indict Donald Trump

Donald Trump was indicted for his role in paying hush-money to a porn star on the eve of the 2016 election, marking the first time in American history that a former president has faced criminal charges.

The grand jury returned the indictment of Mr. Trump after a vote on Thursday, kicking off a process in which the former president is expected to come to New York to face the charges. The indictment, sought by the office of Manhattan District Attorney Alvin Bragg, isn't public.

Trump Indictment Could Boost GOP Primary Bid, but Hurt in a Rematch With Joe Biden

WASHINGTON-The indictment of Donald Trump is unlikely to derail his 2024 White House bid and could help in the GOP primary, but it could also further alienate swing voters turned off by the controversies that continue to swirl around him since he left office.

The unprecedented nature of a former president facing criminal charges, in a case involving a hush-money payment to a porn star, carries many unknowns. But Mr. Trump's strategy is already in view, following hard-hitting tactics he has used throughout a short, turbulent political career.

U.S.-Russia Rift Complicates Case of Arrested Journal Reporter

WASHINGTON-Moscow's arrest of a Wall Street Journal reporter on espionage charges this week broadens a rift between the U.S. and Russia that is already so wide, the two nuclear powers barely maintain diplomatic communications.

That will make any agreement on the release of the reporter, 31-year-old Evan Gershkovich, difficult to secure as he heads toward a trial in a court under the control of Russia's security service, the FSB, U.S. officials say.

Taiwan Leader's U.S. Visit Is Purposely Low-Key

NEW YORK-It is the highest-profile U.S. visit by a Taiwan leader in years. Nonetheless, President Tsai Ing-wen is keeping largely out of the public eye.

A U.S. stopover that began Wednesday in New York marks Ms. Tsai's first foreign travel since mid-2019 and comes at a time of heightened tensions with China that many fear could veer into future armed conflict.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

East Side Games 4Q

LifeSpeak 4Q

MediPharm Labs 4Q

Economic Calendar (ET):

0830 Jan GDP

Stocks to Watch:

Barrick Gold: Porgera Gold Mine Operations to Resume; Papua New Guinea, Govt, Barrick Niugini and New Porgera Ltd. Signed Agreement to Progress With Resumption of Mine Ops, Which Have Been Suspended Since 2020;

Porgera Has Measured & Indicated Resources of 10M Oz, Inferred Resources of 3.4M Oz; Mine Forecast to Produce Average of 700,000 Oz/Year; All Parties in Agreement Committed to Reopening Mine at Earliest Opportunity; New Porgera Project Team to Move Ahead With Filing for Special Mining Lease, Meeting Other Conditions for Reopening;

51% of Equity in New Porgera Shared by PNG Stakeholders, Including Landowners and Enga Provincial Govt; Economic Benefits Will Be Split 53% for PNG Stakeholders, 47% for Mine Operator Barrick Niugini; Goods & Services to Be Sourced Locally in Porgera Where Possible, Hiring Preference Given to Locals; Reopening Would Futher Validate 'Host-Country Partnership Model' Co Also Has in Tanzania, Pakistan

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Cathedral Announces Delay in Filing 2022 Annual Financial Statements; Delay Due to Volume of Auditing Work Related to Significant Acquisition Activity, Related Financing, Company Transformation; Audit Remains in Process; Expects to File Annual Statements by April 14;

Anticipates Record 4Q, FY Results After Record-Settting 3Q; Sees Consolidated 4Q Rev Up More Than 18% Vs 3Q on Higher Pricing, Among Other Factors; 4Q Rev Should Boost Overall Results, Including Net Income, Adj EBITDA

Other News

Rio Tinto said it will form a joint venture with First Quantum Minerals to develop the La Granja copper project in Peru.

The miner said that First Quantum will acquire a 55% stake in the project for $105 million, and commit to further invest up to $546 million into the joint venture to take the project through a feasibility study and the development works.

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