UKX

MARKET WRAPS

Stocks:

European shares extended their recovery on Tuesday as banking sector worries continued to ease.

The agreement by First Citizens to buy the deposits and loans of Silicon Valley Bank has helped underpin sentiment, with European bank stocks remaining steady.

"With contagion limited for now, hopes that the debacle will have less of an impact on global growth have ticked up a little," Hargreaves Lansdown said.

Stocks to Watch

Things are looking up for Adidas after recent difficulties, Deutsche Bank said.

Demand for its Originals sneakers should help cover some of the shortfall from the ending of the Yeezy partnership with Kanye West, while selling off remaining Yeezy stock would lessen the blow to the bottom line this year, Deutsche Bank said.

Recent results by Nike suggest rays of light for Adidas's margin recovery and for its shift back toward greater wholesale sales, DB added. "The Adidas news flow is improving."

Deutsche Bank has kept its rating on the stock but lifted its target price to EUR170 from EUR165.

---

Siltronic will suffer from overabundance in the microchip market, Hauck Aufhaeuser said, starting coverage with a sell recommendation on the stock.

Semiconductor demand is weakening at a time chip-wafer manufacturers--a market in which Siltronic has a 13% share--have embarked on a capacity-expansion drive, according to Hauck Aufhaeuser.

"As a result, capacity additions look largely superfluous now and are destined to trap the global wafer market in a state of oversupply, in our view."

Hauck Aufhaeuser believes the overabundance will start to pressure the company's prices and margins this year and accelerate in 2024, and expects sales to decline 1% each year through 2025.

Economic Insight

Protests against pension reform in France aren't expected to have a lasting impact on the economy as their short-term hit will be offset by stronger growth over the rest of the year, Oxford Economics said.

According to its baseline scenario, the pension reform bill will be implemented as it is by year-end, raising France's long-term economic outlook. However, if protests become stronger, there would be a larger impact on activity and likely a government reshuffle that could bring some market stress.

In a worse-case scenario, prolonged protests which led to the withdrawal of the reform would cause a permanent shift in French sovereign rates as investors see the bill as essential for public-finance sustainability.

U.S. Markets:

Stock futures were little changed, with the banking sector showing further signs of stabilization.

Banks that were hammered by a crisis of confidence after Silicon Valley Bank and Credit Suisse collapsed earlier this month have continued to stage a comeback.

In premarket trading, First Republic Bank rose 5%, while PacWest Bancorp and Western Alliance Bancorp each added 1%.

Later this week, a key inflation reading is due out: the personal-consumption expenditures price index, which is closely watched by the Fed.

Before that, Tuesday will deliver the advanced trade balance in goods, advanced retail inventories, advanced wholesale inventories reports for February, the January S&P Case-Shiller home price index, the FHFA home price index and consumer confidence for March.

Follow WSJ markets coverage here .

Forex:

Sterling has made more solid gains and was the third best-performing G10 currency in March after the yen and Swiss franc, boosted by a reversal of some investor pessimism towards the U.K. economy, MUFG Bank said.

The U.K. economy's resilience is keeping pressure on the Bank of England to raise interest rates, MUFG added. Meanwhile, BOE Governor Andrew Bailey on Tuesday provided reassurance that U.K. banks are well placed to support the economy.

"The comments leave open the possibility of one further 25 basis points hike at the next Monetary Policy Committee meeting on May 11," MUFG said.

Read Sterling Could Extend Gains Vs Dollar on BOE-Fed Divergence

Separately, MUFG said the dollar was being hit as improved global risk sentiment reduces demand for safe haven assets.

It follows some relief on Monday for European banks and U.S. regional banks after news that First Citizens BancShares will buy much of failed Silicon Valley Bank, MUFG said.

An expected tightening in credit conditions resulting from recent banking sector troubles has prompted the market to lower its Federal Reserve interest rate rise expectations.

"The tentative improvement in global investor risk sentiment at the start of this week leaves the dollar vulnerable to further weakness on the back of the recent sharp adjustment lower in U.S. yields."

---

UniCredit Research said the euro could rise further as European Central Bank members continue to signal further interest rate rises.

"We still expect [EUR/USD] to recover even beyond the year-to-date peak of 1.1033, as we expect a progressive convergence in policy rates between the Federal Reserve and the ECB over the medium term," UniCredit said.

Moreover, investors remain considerably net-long EUR/USD, expecting it to rise, showing no signs that confidence in the euro has been undermined by recent market turbulence affecting the eurozone banking sector.

Bonds:

Volatility is the big "winner" in this banking crisis, according to Natixis.

"Constantly on the lookout for the weakest link, markets seesawed in reaction to any news concerning banking sector issuers on both sides of the Atlantic," it said.

In this context, visibility on the evolution of the Federal Reserve's and European Central Bank's monetary policies is much murkier.

"For the time being, markets are sceptical about further rate hikes, yet central banks are sticking to their restrictive rhetoric about combating inflation," Natixis said, adding, that logically, this divergence of views is stoking bond market volatility.

Read Banking Jitters Seem to Justify Bullish View on Rates, ING Says

Energy:

Crude futures wavered after registering their biggest gains since December, as the turmoil surrounding U.S. banks continued to drive moves in oil prices.

"Crude oil surged higher after investors were emboldened by promised support for the U.S. banking sector," ANZ Bank said.

Metals:

Metal prices were mixed in early trading, with gold slightly firmer, as investors feel more optimistic about bank risks and oil's recovery is rippling through commodity and currency markets, Peak Trading Research said.

"Investors feel more optimistic about bank risks and crude oil's recovery is rippling through commodity and currency markets."

Peak also noted that there are few major macro data points this week, with markets looking to Friday's PCE inflation data.

Rare Earths

The rare-earths market's reaction to Tesla saying it won't use rare earths in next-generation motors was overdone, according to Macquarie, which highlighted that no reliable high-performing magnets without neodymium have been used in EV manufacturing to date. "Impacts would be limited in the short term."

Still, Macquarie expects a small market surplus near term, with rare-earths supplies likely to be boosted by higher mining and refining quotas in China. That prompted downgrades to the bank's rare-earths price forecasts.

DOW JONES NEWSPLUS

EMEA HEADLINES

Multinationals Slam New EU Foreign-Subsidy Law's Reporting Rules

BRUSSELS-Multinational companies including Intel Corp. and Raytheon Technologies Corp. are warning that new European Union rules for reporting foreign subsidies are so onerous they could disrupt mergers and acquisitions and impede public tendering.

In a letter sent last week to the European Commission, the bloc's executive body, the companies said the commission "severely underestimates" the work required to comply. While the companies said they support the overall aim of the new rules, they said their implementation "will result in an extremely complex administrative ordeal."

New Shell CEO Faces Big Dilemma: Should the Company Pump More Oil?

HOUSTON-Wael Sawan knows he is about to make some people very unhappy.

The new chief executive of Shell PLC is in the midst of crafting his business plan for the London-based energy giant, including whether to increase oil production. Doing so would please many investors looking to build on last year's oil-and-gas bonanza, which produced record annual earnings for Shell.

Adidas and Beyoncé to Part Ways After Ivy Park Sales Struggles

Beyoncé and Adidas AG have decided to end their fashion partnership, according to people familiar with the matter, splitting up after years of lackluster sales for her Ivy Park line of apparel.

The partnership will end after the company releases Ivy Park collections of merchandise that are already planned for this year, the people said. The Hollywood Reporter earlier reported that the two sides were breaking up.

UK Shop-Price Inflation Hits Record High in March Led by Fresh Food

U.K. shop-price inflation hit record highs across all categories in early March, lead by fresh food, according to the latest report by NielsenIQ and the British Retail Consortium released Tuesday.

Prices at U.K. stores in the period March 1-7 were 8.9% higher than the same period a year earlier. This compares a record increase of 8.4% in the same period a month prior, and a three-month average rate of 8.4%, according to the report.

Ocado Backs FY 2023 Views After 1Q Retail Revenue Rose on Higher Orders

Ocado Group PLC said Tuesday that first-quarter sales of Ocado Retail Group, the joint venture it co-owns with Marks & Spencer Group PLC, rose and that guidance for fiscal 2023 remains unchanged.

The online grocer and retail-technology specialist said retail revenue for the 13 weeks ended Feb. 26 rose to 583.7 million pounds ($717.1 million) from GBP564.7 million a year ago. The rise was followed by average orders per week increase of 3.6%.

United Utilities Expects FY 2023 Revenue, Performance Payment to Miss Guidance

United Utilities Group PLC said Tuesday that it expects its fiscal 2023 revenue and a performance-related payment to miss guidance.

The FTSE 100-listed water company said revenue for the year ending March 31 has been hurt by timing effects such as lower consumption, which will be recoverable in future years.

ProSiebenSat.1 to Focus Investments on Entertainment Business

ProSiebenSat.1 Media SE said Tuesday that it plans to focus investments on its entertainment business as it seeks to boost its Joyn streaming platform and increase the digital share of advertising revenue.

The German broadcaster said it will review acquisition opportunities and cooperate with industry peers to support its growth ambitions in entertainment. The company also said will seek to monetize its growing digital reach through new ad products.

Diageo CEO Ivan Menezes to Step Down After Nearly a Decade in Role - Update

Diageo PLC on Tuesday said that Chief Executive Ivan Menezes will be retiring after nearly 10 years in the role and will be replaced by current Chief Operating Officer Debra Crew.

The London-based maker of Johnnie Walker Scotch whisky, Guinness stout and Smirnoff vodka said Mr. Menezes will leave the board on June 30 and Ms. Crew will join on July 1.

Easter flight disruption set to hit U.K. passengers as Heathrow workers strike

British Airways cancelled hundreds of flights to and from Heathrow airport over the Easter holiday week due to upcoming strikes by airport staff.

Airport security workers part of Unite union voted to strike between March 31, and Easter Sunday, April 9, over issues with pay. Heathrow has offered a 10% pay rise after pandemic-induced pay freezes.

GLOBAL NEWS

Top Bank Regulators to Face Senate Questions Over SVB, Signature Collapses

Three top U.S. officials are likely to face pointed questions from lawmakers Tuesday about their oversight of Silicon Valley Bank and Signature Bank, as well as their response when the banks collapsed.

The hearing is the first step on Capitol Hill in what could be a monthslong process probing how the two banks quickly failed and whether stricter supervision by financial regulators could have prevented their demise.

To Some Investors, Banks Look Like Bargains

A growing number of investors are betting on a rebound in the banking sector, wagering that regional lenders are in much better condition than many initially feared after the collapse of Silicon Valley Bank.

Bank shares rallied Monday, while U.S. Treasury prices fell, after First Citizens Bancshares reached a deal with federal regulators to buy large pieces of Silicon Valley Bank. The run on SVB that started March 9 had sparked a rout in banks and a surge in demand for Treasurys, reflecting fears that trouble in the financial sector could hurt the broader economy.

For Chip Makers, a Choice Between the U.S. and China Looms

WASHINGTON-Semiconductor companies seeking federal grants under the Chips Act could face a tough decision: take Washington's help to expand in the U.S., or preserve their ability to expand in China.

The Biden administration last week proposed new rules detailing restrictions chip companies would face on operations in China and other countries of concern if the companies accept taxpayer funding.

Distress in Office Market Spreads to High-End Buildings

Defaults and vacancies are on the rise at high-end office buildings, in the latest sign that remote work and rising interest rates are spreading pain to more corners of the commercial real-estate market.

For much of the pandemic, buildings in central locations that feature modern amenities fared better than their less-pricey peers. Some even were able to increase rents while older, cheaper buildings saw surging vacancy rates and plummeting values. Now, these so-called class-A properties, whose rents generally fall into a city's top quartile, are increasingly coming under pressure.

U.S. and Japan Strike Deal on Minerals Used in Batteries for Electric Cars

WASHINGTON-The U.S. and Japan reached a trade agreement for minerals used in clean-energy technologies, a deal aimed at allowing Japan to meet sourcing requirements for new electric-vehicle subsidies in the U.S. and shifting energy supply chains away from China.

Under the deal, the U.S. and Japan agreed not to levy export duties on critical minerals they trade and coordinate labor standards in producing minerals, among other steps, according to a U.S. announcement. The pact builds on a limited trade accord the two countries reached in 2019, and they will review the minerals deal every two years to see if they should end or change it.

China Boosts Lending to Struggling Belt and Road Borrowers

SINGAPORE-China's emergency support for borrowers from its Belt and Road infrastructure program has ballooned as foreign governments struggle under heavy debts, highlighting the extent of Beijing's bad loan problem as it works to overhaul its overseas lending strategy.

The scale of China's often-opaque assistance to borrowers in distress means Beijing has effectively established a new system for international rescue lending that exists alongside the International Monetary Fund and other Western institutions, according to new research published by the World Bank.

Recession looks less likely for U.S., these economists say, but a 'slog' still lies ahead

Despite the recent turmoil in the bank sector, a recession is still not the most likely outcome for the U.S. economy over the next two years, analysts at the Peterson Institute for International Economics said Monday.

"The data has been more resilient than we thought it would be," said Karen Dynan, a professor of the practice of economics at Harvard University, at a briefing for reporters ahead of the formal release of their semi-annual forecast.

Wind-power industry predicts rapid growth in 2023, just in time for Biden's offshore push

An optimistic global report on the outlook for wind energy issued Monday bodes well for recent announcements in the U.S., which is pushing offshore to try to harness more green-energy replacements for coal, oil and gas.

The Brussels-based trade association Global Wind Energy Council in a report projected 680 gigawatts of new global onshore and offshore wind will be installed by 2027. That represents enough wind to power about 657 million homes annually.

Fed's Barr Calls Silicon Valley Bank a 'Textbook Case of Mismanagement'

WASHINGTON-The failure of Silicon Valley Bank demonstrates a "textbook case of mismanagement," the Federal Reserve's top banking regulator is expected to tell Senate lawmakers on Tuesday, while acknowledging there may have been shortcomings in the central bank's oversight.

"SVB failed because the bank's management did not effectively manage its interest-rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors," said Michael Barr, the Fed's vice chairman for supervision, in written testimony released by the central bank.

Fed's Barr Calls Silicon Valley Bank a 'Textbook Case of Mismanagement'

WASHINGTON-The failure of Silicon Valley Bank demonstrates a "textbook case of mismanagement," the Federal Reserve's top banking regulator is expected to tell Senate lawmakers on Tuesday, while acknowledging there may have been shortcomings in the central bank's oversight.

"SVB failed because the bank's management did not effectively manage its interest-rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors," said Michael Barr, the Fed's vice chairman for supervision, in written testimony released by the central bank.

Kim Jong Un Says He Will Expand Production of Nuclear Material

SEOUL-North Korean leader Kim Jong Un called for expanding the production of nuclear material to boost the country's arsenal exponentially, saying his weapons program was aimed at defending the country.

Photos released by North Korean state media on Tuesday showed Mr. Kim inspecting new tactical nuclear warheads, called "Hwasan-31," for the first time. Around 10 red and green nuclear warheads were displayed alongside short-range ballistic missiles and long-range cruise missiles. He also reviewed plans for a nuclear counterattack and was briefed on a nuclear-weapons management system called "Haekbangashoe," which means nuclear trigger, state media said.

No 'Social Policy' in Chips Act Rules, Commerce Secretary Gina Raimondo Says

WASHINGTON-Republicans and Democrats are sparring over measures in the $53 billion Chips Act that the Biden administration says are needed to ensure the measure's success, but which Republicans say are an effort to pursue liberal social policies.

The Commerce Department has set rules for semiconductor companies seeking grants under the act that encourage the hiring of union workforces and economically disadvantaged individuals. Companies seeking more than $150 million must provide child care.

Republican-Led Panel Issues Subpoena to State Department for Afghanistan Dissent Cable

WASHINGTON-The Republican-led House Foreign Affairs Committee issued a subpoena to the State Department for a 2021 dissent cable in which diplomats with the U.S. Embassy in Kabul called for a hastened evacuation and warned that the Taliban's takeover of the Afghan capital was imminent.

In a statement late Monday, committee Chairman Michael McCaul (R., Texas) said the panel made "multiple good faith attempts" to obtain the cable, adding "unfortunately, Secretary [of State Antony] Blinken has refused to provide the Dissent Cable and his response to the cable, forcing me to issue my first subpoena as chairman of this committee."

Trump Probe Places Manhattan D.A. Alvin Bragg in Spotlight

Manhattan District Attorney Alvin Bragg's pursuit of potential criminal charges against former President Donald Trump could provide a case for the history books while also testing one of New York City's top prosecutors, a newcomer to political office who built his career in state and federal law enforcement.

Mr. Bragg, 49 years old, took office in January of last year, becoming the first Black district attorney in Manhattan after winning the nomination in a crowded Democratic field and then triumphing in his first run for public office. He campaigned by touting his lengthy record in law enforcement, which includes stints with the U.S. attorney's office for the Southern District of New York and the New York attorney general, as well as sharing his personal experiences living with crime and aggressive policing while growing up in Harlem during the 1980s crack epidemic.

Write to paul.larkins@dowjones.com

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

March 28, 2023 05:53 ET (09:53 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.