European markets rise with U.S. debt ceiling talks in final stages – Reuters

UK Finance Minister Jeremy Hunt told Sky News he would be comfortable with rate hikes by the Bank of England pushing the economy into a recession as long as inflation falls.

“Because at the end of the day, inflation is a source of instability,” Hunt said. He added that fiscal and monetary policy must work in alignment “to balance the books so that the markets, the world can see that Britain is a country paying its share”.

Money markets raised their bets on the central bank’s maximum rate from 4.75% to 5.5% after figures released on Wednesday showed inflation had fallen less than expected.

The bank’s key rate is currently 4.5% and a 25 basis point hike in June is widely expected.

Gilt yields have risen, approaching levels last seen in the wake of former Prime Minister Liz Truss’ mini budget last October.

The International Monetary Fund this week joined the Bank of England in saying it no longer expects the UK to go into recession this year, while noting that the outlook was “moderate”.

Germany entered a technical recession in the first quarter, according to revised statistics released on Thursday.

—Jenni Reid

UK retail sales volume rose 0.5% from the previous month in April, the Office for National Statistics said on Friday.

Economists polled by Reuters had expected a 0.3% rise after volumes fell 1.2% in March.

However, volumes were down 3% from a year earlier, with the amount spent by consumers increasing by 4.7%, showing the impact of inflation on shoppers.

Ashley Webb, UK economist at Capital Economics, said better weather, increases in state pensions, social benefits and the minimum wage, and a government cost of living payment to low-income households have probably drives up the monthly figure.

“Overall, as the outlook for retail sales appears to be improving, we expect further interest rate hikes, from 4.50% now to a high of 5.25%, and that “They stay elevated through the end of next year. That will mean real consumer spending is more likely to fall later this year than rise,” Webb added.

—Jenni Reid

European markets are expected to open Friday in mixed.

Britain’s FTSE 100 index is expected to open down 3 points to 7,575, Germany’s DAX up 0.5 points to 15,804, France’s CAC up 5.2 points to 7,239 and Italy’s FTSE MIB higher. up 87.5 points to 26,508, according to IG data.

—Jenni Reid

Parts of the market are in overbought territory, but Morningstar’s Dave Sekera says some stocks the company is bullish on are still trading below its fair value estimates.

They include a tech giant and a major US bank.

CNBC Pro subscribers can learn more here.

—Weizhen Tan

Earnings season is over and Goldman Sachs has identified three stocks with major upside potential.

In the first quarter, the investment bank said, investors focused on global consumer health and post-pandemic growth balanced with higher margins. However, going forward, he expects investors to focus on larger companies with profitable business models.

Based on their first quarter results, Goldman expects the shares of three companies it has identified to rise more than 75%.

CNBC Pro subscribers can learn more here.

—Ganesh Rao

Congressional leaders and President Joe Biden were close to a preliminary agreement to raise the debt ceiling on Thursday, according to a Reuters report citing people familiar with the matter.

Progress between Biden and House Speaker Kevin McCarthy is pinned at $70 billion in discretionary spending, the report said.

—Brian Evans

Boston Federal Reserve Chair Susan Collins thinks the central bank will stop raising interest rates.

In a speech Thursday to graduates of the Community College of Rhode Island, Collins said she saw “signs of moderation” in inflation that could negate the need for future hikes.

“I think we may be at or near the point where monetary policy can put interest rate hikes on hold. This will provide an opportunity to more fully assess the impact of the measures taken to date and the general tightening of credit conditions on economic activity,” she said in prepared remarks.

Market prices, however, have changed, with the expectation now that the Fed will hike a quarter of a percentage point by the July meeting.

—Jeff Cox