Take Five: April showers earnings and elections

div classBodysc17zpet90 cdBBJodivpReuters – From HSBC and Volvo in Europe to Apple and McDonalds on Wall Street, firstquarter earnings are coming in thick and fast. But will they give lacklustre stock markets a lift？

pIn France, a Marine Le Pen presidency looks unlikely. Then again, what seemed impossible in January may come to pass soon — a Russian sovereign debt default.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pHeres a look at the week ahead in markets from Kevin Buckland in Tokyo, Saqib Ahmed in New York, Danilo Masoni in Milan, and Dhara Ranasinghe and Karin Strohecker in London.p

p1 VIVE LA FRANCE

pUnlike in 2017, investors haven‘t had to fret this year that French presidential elections would result in “Frexit”. If opinion polls are right, they don’t need to worry either that farright candidate Marine Le Pen may win Sundays runoff vote.

Incumbent Emmanuel Macron, who has led the euro areas secondbiggest economy for five years, enjoys a 12point lead over Le Pen, and emerged the stronger candidate after a key TV debate.

French bond yield premia over toprated Germany are stable as is the euro, unlike in 2017 when Le Pen espoused ditching the single currency.

Still, a Le Pen presidency, which would trigger a constitutional crisis, has never been closer. And even if Macron wins, he cannot count on a majority in Junes parliament election.

So, the real test for markets may be yet to come. And history shows opinion polls can get election outcomes wrong.

GRAPHIC: French bond spreads tighter compared to 2017 election https:fingfx.thomsonreuters.comgfxmktxmpjoykeovrFRANCE2104.PNG

2 TRUE DOVEp

pAhead of Thursdays policy meeting, the Bank of Japan has left no doubt about its commitment to supercharged stimulus, leaping into markets to defend its 0 bond yield target — even at the expense of a plunging currency.p

The contrast between the BOJ and the hawkish Federal Reserve is at the heart of the yens tumble to a twodecade trough near 130 per dollar.p

The yens 11 fall in the course of a month has prompted warnings from finance minister Shunichi Suzuki against rapid depreciation, putting markets on alert for an intervention. But BOJ Governor Haruhiko Kuroda has stuck to the view that yen weakness overall is a positive for Japan.p

pThe IMF seems to agree. A senior official said yen moves were down to fundamentals and there was no need to change policy, including the BOJs ultralow rate stance. p

ppGRAPHIC: Dollaryen chases U.S. yields higher https:fingfx.thomsonreuters.comgfxmktlbpgnygjxvqPasted20image201650521218750.pngp

pp 3 TECH TROUBLE

pIts been a gloomy year so far for U.S. stocks and for tech firms, and the ongoing results season could make it worse.

pNetflixs share rout after reporting falling subscriber numbers has sparked trepidation about upcoming earnings from Facebookparent Meta, Googleparent Alphabet. Apple and Amazon.p

pThis socalled FAANG grouping benefited hugely from the lowrate, workfromhome environment. But with interest rates on the rise, their shares have cumulatively lost some 2.5 trillion in market value this year.p

pOverall S&P 500 earnings are projected to expand 6.3. But Apple quarterly adjusted earningspershare are seen growing by just 2 versus the yearago period, while a 0.7 dip is expected at Alphabet. And EPS declines at Amazon and Meta could be as much as 49 and 24 respectively, Refinitiv data shows.

GRAPHIC: All FAANG, no bite https:graphics.reuters.comUSASTOCKSgdvzyayaepwchart.pngp

pp4 EUROPE INC: EARNINGS AND INFLATIONp

pAs the Ukraine war rages, European companies fullyear earnings revisions — the number of upgrades minus downgrades — have turned negative the first time since October 2020. p

pQ1 earnings growth will still be 25, Refinitiv projects, possibly enough to lift a bearishly positioned market. Yet, with more than 140 companies unveiling earnings during the April 2529 week, there are questions over cost pressures and whether these can be passed to consumers.p

Giants such as Nestle and Danone managed to grow Q1 earnings while raising prices, but smaller peers may struggle to do so.p

Leading banks, including UBS, Deutsche, HSBC and Barclays also report after a disappointing Q1 share performance, the prospect of higher rates is now lifting the sector. p

GRAPHIC: European earnings https:fingfx.thomsonreuters.comgfxmktlbvgnynyqpqEuropean20earnings.PNGp

pp5 OLD JOB, NEW PROBLEMS

pRussian central bank governor Elvira Nabiullina starts her new fiveyear term in charge of monetary policy with a big todo list: dealing with a fullscale crisis caused by unprecedented and ever widening Western sanctions.p

The economy is expected to suffer its steepest contraction since the years following the 1991 fall of the Soviet Union, Russia is on the cusp of debt default and annual inflation has soared past 20.

pStill, Nabiullina may cut interest rates on Friday, possibly by 200 basis points, from the current 17. That will partly reverse the emergency rate hike the central bank was forced into after the Kremlins February 24 invasion of Ukraine.p

Ratesetters are also expected to discuss lifting capital controls, and the need to recapitalise some banks.

ppGRAPHIC: Russia inflation https:fingfx.thomsonreuters.comgfxmktzgvomlbqnvdPasted20image201650568920953.pngp

pp Compiled by Sujata Rao editing by Kim Coghillp

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