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STOXX 600 falls 0.25%
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Nasdaq futures slide after big-tech earnings
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Focus on U.S. jobs report
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HOW ABOUT A 4% TERMINAL RATE? (1118 GMT)
The data-dependent game is still on and market participants
still flag that an ECB deposit rate at 3.25%, which many analyst
see at the end of the tightening cycle, might not be enough to
tame inflation.
Deutsche Bank analysts acknowledge that the yesterday's ECB
comments on what comes after March opened all possibilities,
including the potential for a pause in rate hikes.
"However, this was not borne out by the press conference and
the Q&A," and President Christine Lagarde's overarching message
at yesterday's press conference was hawkish, they say.
Furthermore, after the announced 50 bps hike in March, the
ECB will be even more data-dependent as rates will solidly be in
restrictive territory, they argue.
Deutsche Bank draws three scenarios. The ECB could hike into
the summer up to 3.50-3.75%; it could pause at 3.25% in May and
deliver a second wave of hikes to 3.75-4.00% later this year and
into 2024; it could raise to 3.25-3.50% by mid-year and then
hold that level through 2024.
"At the margin, our sense is there is a stronger consensus
for holding at the terminal rate for longer than pushing the
terminal rate much higher above 3.25-3.50%," they say.
Markets and the central bank might underestimate the risk of
solid economic headwinds in 2023.
ECB euro short-term rate (ESTR) August 2023 forward was at around 3.3%, implying an ECB deposit
rate at 3.4% this summer.
(Stefano Rebaudo)
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CENTRAL BANKS ARE NOW YOUR FRIEND (1049 GMT)
It's been a big week for central banks sounding less
hawkish.
What started with the Fed hiking by a smaller increment on Wednesday, later saw the BoE and ECB both signal a slowdown in rate hikes is just around the corner, helping lift equity markets around the globe to their highest in months.
"Central banks not pushing back on dovish market expectations have turbocharged the Goldilocks mood, despite rather uninspiring Q4 earnings," say Barclays equity strategists, led by Emmanuel Cau. Widespread optimism has pushed the pan-European STOXX 600 up almost 8% this year, with the index up over 20% from its October 2022 low.
Barclays notes that a majority of investors have been reluctant to chase the recent rally and remain under-exposed to equities, but says this may change now after the central bank announcements, with market momentum now "firmly positive".
"Cyclical, rates sensitive and stagflation sector losers of 2022 may be prone to more short covering/chasing," Barclays says.
(Samuel Indyk)
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SLUGGISH START IN EUROPE; SANOFI SLIDES (0845 GMT)
Equity markets in Europe opened in the red on Friday, with
losses broad-based across all sectors.
Shares in French pharma giant Sanofi are down almost 5% and are the biggest negative weight on the STOXX 600 after the company said launches for two new drugs this year would drag earnings lower. The pan-European benchmark index is down 0.5%, while Germany's DAX is off 0.9% and France's CAC 40 is down 0.7%.
Britain's FTSE 100 is little changed, but is outperforming most other major bourses as shares in oil majors BP and Shell trade higher.
Investor focus is now firmly on Friday's U.S. labour market report, which is expected to show nonfarm payrolls increased by 185,000 in January. That would mark the smallest number of monthly jobs created in two years.
Here's your opening snapshot:
(Samuel Indyk)
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STOCK FUTURES SIGNAL SOFTER OPEN; NFPs ON DECK (0731 GMT)
European stock futures are signalling a softer open on
Friday, as a busy week draws to a close with even more risk
events.
In Europe, services PMIs for January will be closely watched for more clues on the state of the economy, while in the U.S., the January payrolls report is the main focus.
A poll of economists surveyed by Reuters expects the U.S. to have added 185,000 jobs in last month, with the unemployment rate seen ticking up to 3.6%.
Futures on the Euro STOXX 50 are down 0.3%. Futures on the DAX , CAC 40 and FTSE 100 are off by 0.1-0.4%.
Wall Street futures are also sliding, with Nasdaq futures down 1.5% after disappointing earnings from heavyweights Apple, Amazon and Alphabet. In Asia, the fallout from the Hindenburg short-seller report continued to weigh on shares of companies in the Adani Group. Their market value now more than halved to below $100 billion. Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3%.
(Samuel Indyk)
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THE MORNING AFTER THE NIGHT BEFORE (0655 GMT)
After the central bank triple-header (that's the Fed, ECB and BoE) buoyed risk appetite and emboldened investor hopes of the end of the massive global tightening cycle came the Big Tech triple-header to revive worries over global economic conditions. Dour fourth-quarter results from Apple , Google-parent Alphabet and Amazon are likely to cast a shadow on the markets on Friday before the crucial non-farms payroll data is released later in the day.
Analysts expect 185,000 jobs were added last month and the report will likely paint a clearer picture of the labour market in the United States.
With the market facing up to the reality of the economic downturn, Asian stocks eased with MSCI's broadest index of Asia-Pacific shares outside Japan 0.7% lower and set to end the week in the red after five consecutive weekly gains. The dollar firmed, while gold steadied.
Meanwhile, Adani Group shares continue to bleed with market losses now over $115 billion (for the seven listed Adani firms)in the wake of a scathing report from U.S short-seller Hindenburg that came out on Jan. 24. The meltdown in share prices have stoked fears of wider impact on the Indian equities. A bright spot for the market was a private sector survey that showed China's services activity in January expanded for the first time in five months, sending business confidence to near 12-year highs. Even amidst the dire earnings reports from U.S. bellwethers there was a hint of hope that consumer spending was beginning to rebound in China.
Key developments that could influence markets on Friday:
Economic events: Euro zone, UK, Germany S&P Global business surveys, U.S. non-farm payrolls data
Speakers, ECB's Christine Lagarde and BoE's Huw Pill to talk in separate events
(Ankur Banerjee)
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