CAUTIOUS MARKETS FOCUS ON CENTRAL BANKS' DIVERGING PATHS (0646 GMT) Investors have hunkered down in Asian hours with stocks drifting while the dollar clings to gains from overnight. The prevailing anxious mood is likely to continue as we head into the crucial next few weeks of central bank meetings. A Reuters poll of economists showed the Fed is expected to deliver a final 25-basis-point rate increase in May and then hold rates steady for the rest of the year. Markets also expect that hike but anticipate some cuts towards the end 2023. The Bank of England on the other hand will likely need to stay on its hawkish path as data through the week showed that British inflation remained hot. According to data released on Wednesday, Britain was the only country in western Europe with double-digit inflation in March, after a more modest decline than had been expected. Investors are now fully pricing in a quarter-point interest rate rise to 4.25% on May 11 at the BoE's next meeting and expect rates to peak at 5% by September, according to futures markets. The differing strategies on opposite sides of the Atlantic have recently pushed sterling and the euro to multi-month highs and investor attention will likely remain on where European currencies go next. Meanwhile, New Zealand's consumer inflation came in below expectations in the first quarter but remained near historic highs, reinforcing bets of another interest rate hike in May. Australia's central bank will get a new specialist board to manage monetary policy, which will be chaired by the governor but have independent expert members with more power over the setting of interest rates. Elsewhere, shares of Tesla slid after the EV maker posted its lowest quarterly gross margin in two years, missing estimates. Elon Musk doubled down on the price war he started at the end of last year, saying Tesla would prioritise sales growth ahead of profit in a weak economy.
Key developments that could influence markets on Thursday:
Economic events: Germany March PPI, Eurozone April consumer confidence, France April manufacturing confidence
(Ankur Banerjee)
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EUROPEAN FUTURES STRUGGLE FOR DIRECTION AS TRADERS EYE KEY EARNINGS (0636 GMT)
Futures are struggling for direction, as sticky inflation and monetary policy come back to the forefront for traders, who also have their eyes on key earnings trickling out of Europe today. Futures on the STOXX 50 are 0.1% higher, while FTSE futures are flat and and DAX futures are down 0.1%. Volatility has dropped as worries around banking stocks receded and players are gearing up for several key central bank meetings in the next few weeks. A Reuters poll of economists found the U.S. Federal Reserve is expected to deliver a final 25-basis-point interest rate increase in May and then hold rates steady for the rest of 2023. On the earnings front, there were positive signals out of Europe on Thursday. French car maker Renault said on Thursday revenues had grown by 30% in the first quarter thanks to a rebound in sales and higher prices, while Sweden's AB Volvo lifted its outlook for key heavy-duty truck markets in Europe and North America this year as it reported a 32% year-on-year rise in order intake for the first quarter. Swiss elevator and escalator manufacturer Schindler also reported a 47% jump in first-quarter profit on Thursday.
But it's not all been plain sailing. Tesla shares are down 6.1% in Frankfurt, after boss Elon Musk on Wednesday said the electric vehicle (EV) maker would prioritize sales growth ahead of profit in a weak economy. Frankfurt-listed shares in meme stock Bed Bath & Beyond plunged 18.4% after media reports that the homeware retailer is preparing to file for bankruptcy.
(Lucy Raitano)
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