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STOXX 600 up 0.8%
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Markets welcome Fed message
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Eyes on ECB, BoE policy decisions
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U.S. stock futures rise
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STOXX GETS TECH UPLIFT, BANKS TAKE A BREATHER (0910 GMT)
Price action in Europe is telling, with traders playing
dovish signals from the Fed. So tech is on the up and banks are
taking a breather, despite mostly positive earnings.
Tech , which suffered heavily last year from big U.S.
rate rises, is by far the top gainer across the STOXX, up 3% to
fresh 10-month highs, also buoyed by investors warming up again
to Facebook parent Meta after a big share buy-back.
Banks instead are down 0.3%, making this the weakest sector in Europe, dragged lower by ING and Deutsche Bank following results from the two heavyweights, and ahead of another round of rate hikes in the euro zone and UK. The good vibes stemming from a less aggressive outlook for U.S. monetary policy meanwhile are boosting several country benchmarks to new highs, while squeezing a gauge of euro zone equity volatility to its lowest since November 2021. The STOXX 600 was last up 0.8%, closing in on the April 2022 highs hit in January. There's also a new milestone for Spain's IBEX which has hit June 2021 levels, up 1.3%.
Here's your opening snapshot:
(Danilo Masoni)
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EUROPE HEADS HIGHER AHEAD OF ECB AND BOE (0746 GMT)
Dovish signals from the Fed and an upbeat forecast from
Facebook parent Meta have injected fresh optimism into markets,
with the good mood spilling over to Europe ahead of keenly
awaited policy decisions at the ECB and BoE later in the day.
EuroSTOXX50 futures were up 0.8% and FTSE contracts gained 0.5%, pointing to a firmer open for Europe
after Wednesday's muted session ahead of the Fed.
Meta's Frankfurt-listed shares rallied 18%,
tracking U.S. after-hours gains after the company forecast Q1
revenues above market expectations and announced a much-welcome
$40 billion new share buy-back programme.
It's a busy day for earnings in Europe too, especially in
the banking sector. Santander, ING, Nordea and Deutsche Bank are
all releasing their numbers and they could prove decisive in
pushing the banking index to new highs.
Santander booked a record 9.6 billion euro profit
for 2022 and Deutsche Bank profit growth exceeded
expectations, helped by higher rates and buoyant trading. Nordea and ING also beat market expectations.
These banks weigh a combined 34% on the EuroSTOXX bank index.
Big Oil is also in the spotlight after hell delivered a record $40 billion profit in 2022 and said it would
repurchase $4 billion in shares.
(Danilo Masoni)
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MARKETS GO ALL IN FOR DISINFLATION (0653 GMT)
Push back? What push back? The main theme ahead of the Fed
announcement was that Chair Jerome Powell would definitely,
totally, absolutely push back against the recent rapid easing in
market conditions given inflation was still sky high.
Instead, Powell seemed to go out of his way to do the
opposite. The very first question in the new conference invited
him to scold markets, and he notes conditions had tightened a
lot last year.
Given another opportunity, he says he's "not particularly
concerned" about market pricing, and later "I'm not going to try
to persuade people that have a different forecast" on inflation
and policy.
Yes there were caveats about it being too early to declare
victory and policy will need to be more restrictive. But even
then he was blase about another "couple of hikes", and spent
more time trying out his new favourite word "disinflation".
A pdf search of the conference shows disinflation or
disinflationary was used 13 times, compared to twice at his
December event. For sure, service inflation had yet to turn the
corner, but he expected to see that "fairly soon."
For markets, this is like stealing the last cookie in the
cookie jar, getting caught red handed, and, instead of a good
spanking, you get another cookie, with chocolate on.
So of course Treasuries rallied, with 10s down 9bp and 2s 10bp in the wake of the conference and a bit more in Asia. Next targets are the Jan lows at 3.321% and 4.04%. Fed funds partied by pricing in more rate cuts with Fed funds seen at 4.40% by end 2023 and 3.0% by the close of 2024. The euro jumped to a 10-month peak of $1.1034 and could go further if ECB chief Christine Lagarde sounds as hawkish as everyone seems to expect after today's policy meeting. The market is almost fully priced for a hike of 50bp and the promise of more to come, though it was notable that Euribor rallied overnight to imply deeper cuts next year. The ECB is also set to reveal how exactly it plans to reduce the multi-trillion euro stock of bonds on its balance sheet. Across the Channel, the Bank of England is also seen hiking 50bp today, though with some outside risk of 25bp. The following media conference by Governor Andrew Bailey and colleagues is likely to be a tough one, assuming they can even get to it given all the strikes.
The IMF, and many others, are predicting recession but inflation is at 10.5% and wage growth running red hot - good luck squaring that circle. For Wall Street, it's a massive earnings day and Meta helped overnight by announcing a $40 billion buy-back that sent its shares up 18%. Healthcare companies BristolMeyers-Squibb Co , Eli Lilly and Co and Merck & Co are due to report before trading commences on Wall Street.
The heavy-hitting trifecta of Apple Inc , Amazon.com and Alphabet Inc are after the bell. Key developments that could influence markets on Thursday: - BoE rate decision is at 1200 GMT and the ECB at 1315 GMT. BoE Gov Bailey speaks to reporters at 1230 GMT and ECB President Lagarde at 1345 GMT
(Wayne Cole)
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