European equities staged a lacklustre opening on Thursday morning, as investors prepared for a series of central bank meetings which are widely expected to bring the first signs of monetary policy tightening against a backdrop of persistent inflation.
The regional Euro Stoxx 600 share index dipped 0.1 per cent, while London’s premium FTSE 100 index fell 0.3 per cent.
The moves echoed a move lower on Wall Street in Tuesday’s session, leading the blue-chip S&P 500 index to close down 0.5 per cent after hitting all-time highs earlier in the week. A decline in US energy stocks as oil prices receded from recent rallies tempered gains in tech and consumer shares, including those of Microsoft and Alphabet. Both companies ticked up on Tuesday after their quarterly numbers topped analysts’ forecasts.
Many more companies across the Atlantic are due to report in the next week, with Apple and Amazon both scheduled to deliver earnings updates after the closing bell on Thursday. Caterpillar, the world’s biggest maker of heavy machinery and something of an economic bellwether, is also due to unveil its performance.
Equity futures signalled that New York’s blue-chip index would tick up 0.1 per cent in early dealings on Thursday, while the tech-focused Nasdaq 100 index would gain 0.2 per cent.
In Asian markets, Hong Kong’s Hang Seng index lost 0.4 per cent in mid-afternoon trading as improvements in non-cyclical consumer and technology stocks were challenged by drops in real estate, healthcare and energy companies.
Meanwhile, government debt yields were broadly steady on Thursday after significant swings a day earlier. The UK’s 10-year gilt posted its biggest one-day rally on Wednesday since March 2020, after the government slashed its planned debt sales by nearly £60bn — a much bigger cut than traders had forecast. On Thursday, the yield on the benchmark bond edged up 0.02 percentage points to 1 per cent. Bond yields move inversely to prices.
The yield on the equivalent US Treasury note increased by the same degree to 1.55 per cent.
Markets were primed on Thursday morning for the European Central Bank’s meeting and subsequent interest rate decision, with other meetings due in the coming days for the Reserve Bank of Australia (next Tuesday), the Federal Reserve (next Wednesday) and the Bank of England’s Monetary Policy Committee (next Thursday).
Officials are expected to outline how they will tackle persistent inflationary pressures, prompted by post-pandemic demand increases paired with supply shortages. During Wednesday’s Budget announcement, UK chancellor Rishi Sunak said that inflation was expected to average 4 per cent over the next year.
Andreas Billmeier, European economist at Western Asset, said he expected a “pretty strong pushback” at Thursday’s ECB meeting against the market’s pricing of earlier rate rises, although the “trend is that central banks are pushing back a little bit less than what people think”, he said — alluding to Canada and Australia.
Billmeier added that he anticipated “a dovish meeting, but communications are going to be quite tricky,” pointing to two data points of credit conditions and inflation expectations. On the policy front, Billmeier said, “the main thing” was to tee up December’s ECB meeting.
