April 24, 2018 / 7:28 AM / 4 months ago

Daily Briefing: Euro zone business confidence ebbing

LONDON (Reuters) - French business confidence data for April just in shows a dip in morale from the previous month, reflecting indications elsewhere that the euro zone's growth cycle may be turning. A similar read-out on German firms' confidence is due in around 0800 GMT - there, analysts are also expecting a fall.

FILE PHOTO: The flags of Germany and France are seen in front of the the Chancellery in Berlin

In the UK, data due at 0830 GMT will likely show that Finance Minister Philip Hammond is on track to meet his target for cutting Britain’s budget deficit in the 2017/18 financial year. A medium-term goal of balancing the books altogether is, however, now not expected to be met until the mid-2020s at the earliest; in the meantime he is likely to come under more pressure to plug increasingly visible shortfalls in health and other services, while boosting public sector pay.

An EU-hosted donors conference starting today in Brussels aims to raise more than $6 billion in aid for Syria, with the European Union also hoping the event can offer Russia, Turkey and Iran a chance to renew peace efforts. As the conflict enters its eighth devastating year, Brussels has invited some 85 governments and non-governmental agencies to raise funds for humanitarian aid, limited reconstruction and de-mining of shattered cities. Russia's Foreign Minister Sergei Lavrov has been invited, but it is not clear he will attend.

MARKETS

World markets are chewing on Google’s strong earnings, oil topping $75 for the first time in almost 3-1/2 years and euro zone economic surprise indices making their first significant bounce since February.

A child sits in a street during a media tour in Douma near Damascus, Syria April 23, 2018

Even though the S&P500 closed little changed on Monday night in the thick of a heavy earnings season, Google-parent Alphabet’s stock price rose after the bell when the company reported an above-forecast 73 percent annual jump in first-quarter profits. While the report also contained signs of rising cost for the internet giant, its overall earnings will be a relief after a ropey few months for the leading U.S. tech companies as we await updates from the likes of Facebook, Amazon and Microsoft later in the week.

Anxiety about smartphone sales and chip demand persisted, however, with Swiss chipmaker and Apple-supplier AMS warning about its second quarter sales due to weaker orders from one of its main customers. AMS stock fell 13 percent in early trade.

Big industrials such as Caterpillar are more in focus stateside later on Tuesday. U.S. and European stock futures were slightly higher first thing after hefty gains on the major Asia bourses in Shanghai, HK and Tokyo overnight.

Rising oil prices stayed high on the radar, with Brent crude probing above $75 on a variety of most supply-related catalysts from anxiety. U.S. attempts to redraw the Iran nuclear deal, Saudi Arabia’s reported ease with prices as high as $100 and some puzzlement at the lack of new U.S. drilling as prices rise were all cited as factors.

The energy price surge has irked inflation-watchers in bond markets this week, although U.S.10-year Treasury yields failed to top 3 percent on Monday and have slipped back somewhat to 2.96 percent this morning awaiting the combined sales of $96 billion in coupon-bearing Treasuries this week. Better-than-expected European flash business surveys for April on Monday have also lifted the gloom on at least two months of underwhelming economic activity data from the region – perking up still deeply-negative economic surprise indices for the first time since February.

The release of German’s Ifo business survey will be watched closely by way of follow-up today as eyes shift to Thursday’s European Central Bank meeting. Euro/dollar steadied in early London trading after dipping below $1.22 to its lowest since March 1 overnight. The dollar took a breather after a strong recent rebound that has unnerved emerging markets in particular.

 — A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own. —

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