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STOXX 600 up 0.4%
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Upbeat earnings from UniCredit, BNP
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Eyes on Fed decision
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U.S. stock futures edge higher
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GETTING BULLISH ON THE NASDAQ (0943 GMT) U.S. regional banks continue to be a source of stress for global markets but Big Tech instead is striking back with strong showings during the earnings season, pushing fund managers to add exposure ahead of a key Fed rate decision. "With the earnings season going into full swing, investors appear encouraged by the recent slew of positive surprises and bullish flows returned to U.S. futures," says Citi in its latest weekly note on positioning across futures markets. "Investors are net long US equities, in particular Nasdaq". More in detail, Citi shows that investors added another $9 billion in new S&P longs over the past week with Nasdaq flows following a similar trend, while risks of profit-taking or short covering remain low as "profits have yet to develop". In the chart you can see year to date price moves for the six biggest Nasdaq 100 constituents - Apple , Microsoft , Alphabet , Amazon , NVIDIA and Meta Platforms .
(Danilo Masoni)
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STOXX CAUTIOUSLY HIGHER (0800 GMT) European equities are cautiously higher on Wednesday ahead of a key Fed policy decision where a 25 basis point is likely, but the central bank will likely hint at a future pause in its tightening cycle due to resurfacing banking sector worries and a possible debt default. "With another round of banking concerns swirling, all eyes will now be on the Fed's decision later today and what Chair Powell has to say about the current issues in markets," Deutsche Bank's Jim Reid says in a note.
"Assuming the hike happens as expected, the bigger question will be what Chair Powell and the FOMC might signal moving forward, not least since market pricing is currently suggesting today will be the last move in the current hiking cycle."
The STOXX 600 is up 0.4%, rebounding after a 1.2% drop on Tuesday. Germany's DAX , France's CAC 40 and Britain's FTSE 100 are up between 0.5%-0.6%. The euro area's banks are leading the way higher after upbeat results from UniCredit and the euro zone's largest lender BNP Paribas.
Meanwhile, shares in airlines are grounded near the bottom of the pan-European benchmark, with Lufthansa lagging after revenue fell short of consensus, while Air France-KLM and British Airways owner IAG are also lower.
Here's your opening snapshot:
(Samuel Indyk)
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FUTURES HIGHER AHEAD OF FED (0633 GMT) European equity futures are rebounding on Wednesday ahead of the latest policy announcement from the
Federal Reserve , with renewed worries about the health of the financial system making a rate hike less certain, although still the most likely outcome.
The
demise of First Republic Bank , the third U.S. bank to collapse since March, again triggered concerns about the health of other
mid-sized lenders, although European banks have so far been relatively unscathed from the problems stateside. Euro STOXX 50 futures are up 0.6% after the index dropped 1.5% on Tuesday. Euro STOXX Bank Index futures are higher by 1.4% after a 2.4% decline the day before. On the corporate front, BNP Paribas, the euro area's largest bank, saw profit more than double in the first quarter, while revenue beat estimates.
Auto maker Stellantis recorded a 14% rise in revenue and initiated a 1.5-billion euro share buyback, while airline group Deutsche Lufthansa said it expected strong demand for holiday travel this summer and confirmed its 2023 outlook.
Futures on the FTSE 100 , CAC 40 and DAX futures are all up between 0.4%-0.5%, while Wall Street futures are a touch higher. MSCI's broadest index of Asia-Pacific shares excluding Japan is down around 0.9%.
(Samuel Indyk)
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DEJA VU FOR POWELL, AS BANK AND DEBT FEARS REVIVE (0550
GMT)
For the second time this year, Fed Chair Jerome Powell will
take the stage in the wake of a bank failure (that's three in
the US for those keeping count: SVB, Signature Bank and First
Republic) and as worries over the financial system resurface.
Amid so much uncertainty, markets are hopeful that the Fed's
current tightening cycle will soon be over.
The collapse of First Republic Bank, the largest U.S. bank
failure since the 2008 financial crisis, has brought back much
of the jitters that gripped the market in March - the last time
the Fed met and raised interest rates by 25 bps. Shares of
regional banks were pulverised on Tuesday and sentiment will
likely be weak through the week.
Also on the minds of investors is the looming deadline for U.S. debt ceiling, with Powell likely to be asked about his contingencies.
With all that in mind, investors have been risk averse, with gold loitering above the key $2,000 level. Trading has been thin due to holidays in China and Japan. Futures indicate European stocks are likely to open higher but whether the gains will hold remains to be seen.
And that brings us back to Powell and what he is likely to say after delivering an expected 25 basis point increase in interest rates. Investors will be keen to parse through his comments to see if there are cuts likely this year as well as the state of the financial system. But as the Reserve Bank of Australia showed us earlier this week, central banks are still capable of surprising the market.
Speaking of surprises, short seller Hindenburg Research took aim at Icahn Enterprises LP over the reporting of its finances, leading to a 20% drop in the shares of activist investor Carl Icahn's firm.
Meanwhile, Advanced Micro Devices shares slid after the chipmaker forecast quarterly sales below estimates due to a weak PC market, overshadowing the company's optimism that the chip market would start to recover in the second half of 2023. Earnings from chip designer Qualcomm later in the day will provide more clues about where the chip market is headed. A sharp recovery in its business in China helped Starbucks beat earnings estimates, highlighting the importance of China's reopening for some consumer companies.
Key developments that could influence markets on Wednesday:
Economic events: Euro zone March unemployment rate, Italy March unemployment rate
Earnings: Airbus, Lufthansa, BNP Paribas, Porsche and Qualcomm
(Ankur Banerjee)
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