LiveWire

The strong sales growth indicated by Salesforce's results is reassuring given the software sector's economic troubles. The growth in new business signings was broad-based, showing that enterprises are still allocating more capital toward cloud products. The strong operating performance (up 24% in constant dollars) remained steady, a leading indicator of future growth. The revised forecast for margin improvement was also encouraging. Margins have been a problem area, and this new guidance should alleviate some worries. This morning, CRM is up about 7% and cloud giants, AMZN, MSFT, GOOGL, and ADOBE are leading the Nasdaq.

French inflation accelerated adding pressure on the ECB to act soon and more aggressively. Earlier inflation data from Spain and Germany also pointed to persistent inflation. ECB officials are expected to announce the end of large-scale asset purchases and plan to raise interest rates in July. In the US, Fed governor Christopher Waller said he aims to keep hikes at a 0.5% pace until inflation gets back to the central bank's goal. The recent developments are sending yields slightly higher, with the US 10-year up 5 bp at 2.80%. Stoxx50 is ceding 0.6%, while S&P500 futures are retracting by 0.5%. 

The Stoxx50 rose to the highest level in six weeks, on improved sentiment, after China reduced some of its strictest Covid-19 measures which have been a source of high uncertainty. In addition, policymakers in China have moved to stimulate the economy, in a bid to avoid soaring unemployment and significant growth deceleration. Investors are welcoming the measures and relaxed restrictions, hoping it will reduce supply-chain bottlenecks and cool commodity prices. Meanwhile, the EURUSD rose 0.25% to 1.0760 as ECB's Lane called for two quarter-point rate hikes.

Markets have welcomed retailers raising earnings guidance on Thursday, reassuring investors about the health of the consumer. The back-to-back strong gains in stock indices come after the FOMC minutes on Wednesday although hawkish in tone, still were welcomed by investors. The narrative around the Fed is improving and traders have revised down bets on how much the Fed will hike interest rates. Implied Fed Funds by year-end have come down from 3% to 2.6%. This afternoon, the Fed's preferred inflation indicator Core PCE will offer more clues on whether inflation is coming down or whether it will take more time.  

Apple has told its suppliers to speed up iPhone development after China's Covid-19 lockdowns affected the schedule for at least one of the new phones. Shanghai remains largely paralyzed by a city-wide lockdown, which is now in its seventh week. The unverified report by Nikkei would confirm the lockdowns in China are creating many delays for corporate America, in addition to the surge in transportation and logistics costs.