Despite yesterday's whopping beats by Amazon and Google which sent the Nasdaq to new record highs after hours, this morning futures S&P futures are little changed ahead of the closely watched Q1 GDP report, European stocks and Asian equities are slightly lower, oil is higher after Russia's energy minister Novak said Russia had reached the 300kbpd oil cut per the OPEC pact, and the dollar was modestly in the red.

Concern about global trade and Trump's "America First" policies kept appetite for risk at bay on Friday, setting world stocks on the path to a sluggish end to what will still be their fifth straight month of gains, per Reuters. Key overnight data included a disappointing GDP print out of the UK, where Q1 growth came in at 2.1%, below the 2.2% expected, which however failed to dent the ongoing short squeeze in sterling, as well as the hot Eurozone CPI print, with headline inflation rising more than expected at 1.9%, while core CPI printed at a 4 year high of 1.2%.

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Economic data and earnings took a back seat, and global equities retreated, trimming a sixth straight monthly advance, as geopolitical concerns lingered following the main overnight news which was a soundbite from a Trump interview with Reuters in which he warned that a "major, major" conflict with North Korea is possible. 

In an interview with Reuters, Trump called the five-year-old trade pact with South Korea "unacceptable" and said it would be targeted for renegotiation after his administration completes a revamp of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Trump's comments stunned South Korean financial markets, sending Seoul stocks and the won into reverse.

Saturday marks Trump's 100th day in office and his attacks on free trade and scepticism about his administration's ability to see through tax and spending campaign promises has dented some of the enthusiasm in markets that followed his election win. "Trump is reaching the 100 day mark with nothing to show for it and these recent comments just coincide with that. They (the U.S. administration) are finding it hard to push through fiscal plans and all this rhetoric is probably related," Kiran Kowshik, strategist at Unicredit.

In Europe, equities pared a third monthly gain as Barclays dropped the most since November, becoming the latest bank in the region with trading results to lag American peers. Banking results dominated early trading with Barclays shares sliding 5 percent after weak investment banking results at the UK bank while UBS jumped 2.6 percent after it handily beat analyst expectations.

Ironically, outside of banking, European corporate profits are ahead of the U.S. The euro was poised for its biggest weekly gain since July, lifted by higher-than-expected eurozone inflation. European government bonds fell. West Texas intermediate crude rebounded after a sharp fall on Thursday.

Bank of America Merrill Lynch noted that the $21 billion of inflows into European equity funds over the past week were the highest since December 2015. "The hard data for equities is earnings -- and they are powering ahead. Q1 earnings season is very strong and revisions trends are positive and broad based," said analysts at the U.S. broker

On the US domestic front, confusion also reigns with the government facing possible shutdown, even as Trump's second attempt to pass Obamacare has been indefinitely postponed. The U.S. GDP data will be assessed to see whether the Federal Reserve’s resolve to raise interest rates two more times this year will materialize even as the prospect of a limited government shutdown looms.

“It’s a busy end to the week with a lot of data out of both Europe and the U.S.,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a note. “Ahead of tomorrow’s first 100 days of Trump today we’ll see if a shutdown can be avoided.”

In summary, the Stoxx Europe 600 Index slipped 0.1 percent as of 6:27 a.m. in New York, dropping for a second day after reaching the highest level since August 2015. Japan’s Topix fell 0.3 percent. The gauge gained 2.9 percent for the week, the best performance this year. Futures contracts on the S&P 500 were unchanged. The underlying gauge rose 0.1 percent on Thursday and the Nasdaq 100 Index jumped 0.5 percent to a record.

In commodities, oil prices rose but were still on track for a second straight weekly loss on concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market.WTI was at $49.43 per barrel at 0649 GMT, up 46 cents, or 0.94 percent, from their last close. However, WTI is still set for a small weekly loss and is around 8 percent below its April peak. Brent crude was at $51.91 per barrel, up 47 cents, or 0.91 percent. Brent is almost around 8.5 percent down from its April peak and is also on track for a second, albeit small, week of declines.

Key economic data include 1Q GDP, U. of Michigan consumer sentiment index. Scheduled earnings include Exxon, Chevron, Colgate.

Bulletin Headline Summary from RanSquawk

• Large-cap bank earnings take focus in EU trade with the likes of Barclays and RBS reporting
• UK GDP figures show a slowdown in quarterly growth, while Eurozone core inflation rises to 4yr high
• Looking ahead, highlights include US and Canadian GDP figures

Global Market Snapshot

• S&P 500 futures up 0.1% at 2,387.50
• STOXX Europe 600 down 0.2% to 387.10
• MXAP down 0.3% to 149.02
• MXAPJ down 0.09% to 486.90
• Nikkei down 0.3% to 19,196.74
• Topix down 0.3% to 1,531.80
• Hang Seng Index down 0.3% to 24,615.13
• Shanghai Composite up 0.08% to 3,154.66
• Sensex down 0.2% to 29,956.44
• Australia S&P/ASX 200 up 0.04% to 5,924.06
• Kospi down 0.2% to 2,205.44
• German 10Y yield rose 2.4 bps to 0.32%
• Euro up 0.2% to 1.0898 per US$
• Brent Futures up 0.6% to $51.77/bbl
• Italian 10Y yield fell 6.6 bps to 1.95%
• Spanish 10Y yield rose 3.4 bps to 1.66%
• Gold spot up 0.2% to $1,266.21
• U.S. Dollar Index down 0.1% to 99.01

Top Overnight News from Bloomberg

• Trump Warns of ‘Major Conflict’ If Talks on North Korea Fail
• Loeb’s Third Point Adds Honeywell, Urges Aerospace Spinoff
• Travolta’s Watchmaker Breitling Said Close to Being Sold to CVC
• Deutsche Bank Said Close to Naming Citi’s von Moltke as CFO
• Honda Predicts Profit Drop on Lower U.S. Demand, Strong Yen
• China’s Didi Raises Over $5.5 Billion in Record Tech FundingB
• Intel-Backed Cloudera Raises $225 Million in Initial Offering
• Barclays Shares Decline After Surprise Drop in Trading Revenue
• UBS Clients Return From Sidelines as Wealth Business Surges
• Boeing Accuses Bombardier of ‘Dumping’ Jets Amid Trade Tension
• Maersk Pays $4 Billion for Hamburg in Record Container Takeover
• Bristol-Myers Squibb’s Hepatitis C Drugs Approved in China
• Pacific Consortium Doesn’t Intend Further Work on Tatts Proposal
• Apple Said to Link Up With Musical.ly: Recode
• Kate Spade Is Said to Be Still Engaging Suitors: DealReporter
• Flexium Sees Sales Gain Amid Apple Order Chatter: Liberty Times
• Toshiba Favors KKR-Led Group’s Bid for Memory Chip Ops, NHK Says

Asia equity markets traded negative after shrugging off the mildly positive lead from Wall Street where the Nasdaq posted fresh record highs amid strong tech earnings, although upside in the broader market was limited by commodity weakness and temperamental US politics. Nikkei 225 (-0.3%) weakened with Japanese exporters hampered by a firmer currency, while energy and mining names dragged on the ASX 200 (-0.1%). Shanghai Comp. (+0.1%) and Hang Seng (-0.3%) were also subdued ahead of the Labor Day weekend and after the PBoC's weekly net liquidity injection was more than halved, while KOSPI (-0.1%) exporters were despondent on Trump comments to renegotiate or terminate the South Korea trade deal. 10yr JGBs saw minor gains amid a dampened risk tone seen in the region and after today's 2yr auction showed the firmest demand since May last year with the b/c rising to 5.51 vs. Prey. 3.82.

Top Asian News

• Tata Power Scouting for Stressed Thermal Power Plants, CEO Says
• BOJ to Cut Purchases of 1-to-5-Year Bonds in May, Plan Signals
• Daiwa Profit Rises on Overseas, Investment Banking Business
• Sharp Reports Narrower Loss, Pushes Back Earnings Outlook
• China Stock Slump Lures Buyers Pivoting Away From Hong Kong

European indices have traded in a broadly tentative manner as stock specific moves take focus over broader macro plays. More specifically, UK banking names have seen different fortunes this morning with RBS (+2.2%) at the top of the FSTE 100 in the wake of positive earnings with investors less-impressed by Barclays (-4.1%) who are at the foot of the index. Elsewhere in the banking sector, UBS (+2.9%) are the notable outperformer in the SMI after their earnings saw Q1 profits exceed expectations. Finally, other notable earnings include Renault (+3.5%) and Sanofi (+1.8%) who have lent a helping hand to the CAC 40. In fixed income markets, Bunds have tracked lower following the latest Eurozone inflation, in which the core inflation (that has been highlighted by the ECB as subdued) rose to levels last seen in 2013. Additionally, the headline figure is now tracking just below the ECB's central bank target of 2% at 1.9%. Consequently, bolstering expectations that the ECB will change there rhetoric at the June meeting.

In currencies, the bulk of the activity today is centred on the EU wide CPI release which has seen EUR/USD rip back to retest 1.0950. Still strong resistance to note here, with 1.0970 and 1.1000 also drawing in sellers. Follow through seen in EUR/GBP also as the cross rate has been resilience on the move down into the low .8400's. Month end demand will have been through the week, but in the wake of the softer UK GDP read on the month — yoy still better than the previous quarter at 2.1% vs 1.9% - this seems to be an obvious buy today given the momentum potential if EUR/USD breaks higher. As such, we expect even more volatility in the aftermath of this afternoon's US GDP print, where consensus of 1.0-1.2% looks a little optimistic, and could spell some more USD weakness ahead. Portfolio rebalancing also suggests some modest USD selling today. USD/JPY is range bound still, but grinding higher to retest the 112.00 level. The independent agenda here is largely down to the BoJ stance, meaning outside of risk off episodes, JPY selling will be the default mode.

In commodities, all eyes on the Oil markets again as the OPEC talk on extending the production cuts dominates the radio waves. The EIA report earlier in the week delivered a larger draw down to send WTI back to USD50.00, but scepticism provided strong resistance there. We have since seen a dip back towards the low USD48.00's, but key tech support has held firm and we are tentatively held mid range with traders also focusing on the USD50.00 level in Brent. Both base and precious metals trade has been relatively tight; risk sentiment balanced to prompt opposing forces, but to a very modest degree.
Gold has recovered a little as the USD index is under some pressure again, with losses in Silver also slowing in momentum. Copper remains range bound, but still struggles above USD2.60.

It is another busy session in the US with Q1 GDP number which is expected to expand at its slowest pace in a year (+1.0% annualized QoQ; +2.1% previous). Aside from that the Chicago PMI number for April (56.2 expected vs. 57.7 previous) will provide an early snapshot of how manufacturing activity is shaping up in Q2, and is followed by the final University of Michigan consumer sentiment number for April (98.0 expected) which is expected to remain unchanged. On the earnings data front we have General Motors, Chevron and Exxon Mobil reporting amongst others to round out earnings for this week.

US Economic Data

• 8:30am: Employment Cost Index, est. 0.6%, prior 0.5%
  • GDP Annualized QoQ, est. 1.0%, prior 2.1%
  • Personal Consumption, est. 0.9%, prior 3.5%
  • GDP Price Index, est. 2.0%, prior 2.1%
  • Core PCE QoQ, est. 2.0%, prior 1.3%
• 9:45am: Chicago Purchasing Manager, est. 56.2, prior 57.7
• 10am: U. of Mich. Sentiment, est. 98, prior 98
  • U. of Mich. Current Conditions, prior 115.2
  • U. of Mich. Expectations, prior 86.9
  • U. of Mich. 1 Yr Inflation, prior 2.5%
  • U. of Mich. 5-10 Yr Inflation, prior 2.4%
• 1:15pm: Fed’s Brainard Speaks About Fintech in Evanston, Illinois
• 2:30pm: Fed’s Harker Speaks in Washington

DB's Jim Reid concludes the overnight wrap

Ahead of tomorrow's first 100 days of Trump today we'll see if a shutdown can be avoided. The last shutdown in 2013 was big news at the time but even though it lasted 16 days markets in the end barely missed a beat and rallied over the period. So its perhaps more of an interesting story reflecting current political wrangling than anything else. It seemed like the shutdown was to be averted for at least a week as the House of Representatives introduced a continuing resolution to provide a week of stopgap funding to extend the deadline for a spending bill to May 5. However House Democrats have threatened to not vote on the continuing resolution if the Republicans tried to bring a revised health care bill up for consideration. To be honest after a rollercoaster few days for US politics I don't think I quite know where we now stand on tax reform, Nafta, healthcare, the wall, the shutdown and geopolitics. It's got a bit too much for me this week. Adding to the mix overnight Mr Trump told Reuters that there could be a "major, major conflict" with North Korea even if he prefers a diplomatic solution which he thinks will be very hard to reach. After the symbolic 100 days is behind us things should calm down a bit in Washington and we'll have the slow "will they/ won't they be able to" on tax reform through the spring and summer months. Also today is Q1 US GDP which we'll preview at the end but are we going to repeat a common post crisis pattern of weak Q1 growth?

The key event yesterday was the ECB rate decision and press conference which we always thought would be a bit on the dull side this time. However given that a whole industry rests on over analysing every word of Mr Draghi then we have to follow suit. Policy rates remained unchanged as expected, and the press conference saw Mr Draghi discuss reduced downside growth risks but also note that inflationary pressures remained too subdued to consider paring back stimulus. DB’s European economists published a note on the meeting highlighting that although economic data has improved, the evidence of a recovery in underlying inflation remains unconvincing and hence the ECB remains cautious of a premature tightening of financial conditions. However, as political hurdles are cleared and core inflation starts to rise, arguments for exiting current policy can start to change. Our economists see economic growth at least sufficient to keep the recovery and reflation themes going, with expectations of the first ECB moves to exit the very accommodative policy stance from June. Hence their baseline remains unchanged with forward guidance to be adjusted in June, tapering to be pre-announced in September and a one-off deposit rate hike in December. However, there were a few issues at the press conference to suggest the change to forward guidance could (temporarily) be delayed beyond June.

The global risk rally faltered in line with the late Wednesday US sell-off yesterday as European markets dipped and US markets flat-lining. In Europe the STOXX (-0.2%) ended a six day winning streak, with Eurozone banks (-1.8%) being hit particularly hard. The FTSE (-0.7%), CAC (-0.3%) and DAX (-0.2%) were all down on the day. Over in the US the S&P500 closed +0.06% higher with earnings perhaps battling politics for the upper hand with lower Oil also influencing (see below). The NASDAQ (+0.39%) stood out and reached a new all time high after holding steady yesterday. We also saw strong earnings for Alphabet and Amazon after the bell.

It was however busier over in government bond markets as we saw German bunds (2Y: -5bps; 10Y: -6bps) and US treasuries (2Y: -1bp; 10Y: -3bps) rally across all maturities, with the former driven by the ECB’s message of continued weak inflation and the latter by risk off moves given the multifaceted uncertainty in Washington. The broad based rally in government bond markets also saw 10Y OAT and BTP yields fall by -6bps and -7bps respectively on the day.

Over in commodity markets we saw oil (WTI –1.4%) drop to a one month low yesterday over supply concerns as Libya reopened its biggest field and US crude production continued to climb. Trump's overnight comments on North Korea have helped it rally back just over a percent this morning though. Gold (+0.2%) ticked up amid the general risk off moves to post its first gain for this week. In FX we saw the US dollar (+0.1%) climb marginally while the Euro traded choppily around Draghi’s comments at the ECB press conference to end the day essentially unchanged.

Asian markets continue to see softer sentiment for risk not helped by Mr Trump's comments. The Nikkei is -0.2% lower with the Hang Seng and Shanghai Comp -0.4% and -0.67% lower respectively. We have China PMI over the weekend to look forward to before the other global PMIs early next week. Remember that Monday is a holiday across lots of Europe.

Staying with Europe, although slightly overshadowed by the ECB, we saw some positive numbers out of Europe yesterday. In Germany we got preliminary CPI numbers for April which came in at +2.0% YoY (vs. +1.9% expected; +1.5% previous) and the GfK consumer confidence survey indicator for May also ticked up more than expected to 10.2 (9.9 expected; 9.8 previous). We also got the final Euro area consumer confidence reading for April which was unrevised as expected (-3.6).

It was a busier day over in the US in terms of data which was mixed though tilted towards indicating some weakness. Preliminary March numbers for durable goods orders (+0.7% vs. +1.3% expected) and capital goods orders (+0.2% vs. +0.5% expected) came in below expectations while wholesale inventories (-0.1% vs. +0.2% expected) unexpectedly fell on the month. We also got March advance goods trade balance number that showcased the US merchandise trade deficit widening but less so than expected (-$64.8bn vs. -$65.2bn expected). Pending home sales declined in March by -0.8% mom (vs. -1.0% expected) following a +5.5% increase in February. We also saw initial jobless claims tick up more than expected (257k vs. 245k expected; 244k previous), although these numbers could be caused by the timing of the Easter holiday rather than a softening labour market. Finally the Kansas City Fed’s manufacturing survey for April fell more than expected to 7 (vs. 17 expected; 20 previous), with firms reporting an increase in activity but with some deceleration.

Before we look at the day ahead, with the Q1 European earning season off to a strong start, one bullish argument for European equities is the scope for a further rebound in earnings, with consensus nowexpecting 15% earnings growth this year, after six years of essentially flat EPS. Our European equity strategist Sebastian Raedler is forecasting a more cautious 10%. He highlights that for European EPS growth to reach 15% would require GDP growth above our economists’ forecasts (with US GDP growth at 3%, Euro-area growth at 2% and China growth at 7%), the euro trade-weighted index falling by more than ourFX strategists expect (by 9%, rather than the projected 7%) and bond yields rising to 1% by year-end (rather than the 0.75% penciled in by our rates strategists).

He also notes that around 30% of the projected consensus EPS growth comes from the resource sectors (energy and mining), with the quarterly EPS figures implying an oil price above $70/bbl, suggesting downside risks for the consensus numbers if the oil price remains closer to the current $50/bbl.

It’s a busy end to the week with a lot of data out of both Europe and the US. In Europe we’ll get preliminary French CPI (+1.4% YoY expected; +1.4% previous) and Q1 GDP numbers (+0.9% YoY expected; +1.1% previous). We will also see the Eurozone CPI estimate for April (+1.8% expected; 1.5% previous) as well as credit and monetary aggregates for the Euro Area. Over in the UK we will see the Q1 GDP number as well (+2.2% YoY expected; +1.9% previous).

Following that we have a busy session over in the US with Q1 GDP number which is expected to expand at its slowest pace in a year (+1.0% annualized QoQ; +2.1% previous). However DB’s Joe Lavorgna notes that this soft growth should be short lived as real GDP growth is expected to rebound to 2.5% in Q2 and then rise to 3.5% in Q3 and 4.0% in Q4. The aforementioned growth profile would result in 2017 inflation-adjusted output growth of 2.8% (Q4/Q4), which would be a meaningful improvement from last year (2.0%) and the fastest pace since 2005 (3.0%). However this forecast assumes a substantial amount of fiscal stimulus and could be hindered by political developments over the last couple of months that have lowered the probability that tax cuts and spending increases will occur as soon as projected at the beginning of the year. As a result there remain downside risks to their GDP forecasts. Aside from that the Chicago PMI number for April (56.2 expected vs. 57.7 previous) will provide an early snapshot of how manufacturing activity is shaping up in Q2, and is followed by the final University of Michigan consumer sentiment number for April (98.0 expected) which is expected to remain unchanged. On the earnings data front we have General Motors, Chevron and Exxon Mobil reporting amongst others to round out earnings for this week.