Stocks slipped and US futures wavered as traders digested a flurry of major earnings and prepared for another jumbo European Central Bank rate hike later Thursday.
The Stoxx Europe 600 Index edged lower, with Credit Suisse Group AG sliding more than 15 per cent after the bank reported its fourth straight loss. Shell Plc gained after posting its second-highest profit and raising its dividend.
Contracts on the S&P 500 advanced less than 0.2 per cent ahead of data that may show the US economy rebounded in the third quarter, while futures on the Nasdaq 100 fluctuated. Meta Platforms Inc. shares plunged as much as 21 per cent in premarket trading after the Facebook parent gave a disappointing revenue forecast and asked investors for patience as costs soared.
The ECB is set to look past intensifying recession fears by lifting its main interest rate by 75 basis points to the highest in more than a decade as it battles record euro-zone inflation. The pace of increases is likely to slow to 50 basis points in December, according to economists. The Bank of Canada hiked by a smaller amount than expected on Wednesday, adding to suggestions that the Federal Reserve is also getting closer to shifting down in gears.
“We are oriented with consensus, expecting a big hike of 75 basis points” from the ECB, Monica Defend, head of the Amundi Institute, said on Bloomberg Television. “We think they will continue being hawkish until December and then with the beginning of the new year, they might review or slow down a little bit the pace. Yesterday the Central Bank of Canada surprised the market with their final hike - we think the ECB will remain bold.”
The yield on the 10-year Treasury bond rebounded after inching below 4 per cent earlier, with investors positioning for less aggressive rate hikes as earnings and economic data indicate a slowdown. The benchmark US yield has dropped more than 20 basis points over the past two days. A gauge of the dollar was steady after two days of steep declines.
The yen climbed to around 145.70 per dollar, extending its rally to more than 4 per cent from a three-decade low reached Friday. The offshore yuan gave up some of Wednesday’s gains.
A contraction in services and manufacturing and fewer new home sales showed the Fed’s efforts to cool the economy seem to be bearing some fruit. Still, economists expect the Fed to hike by 75 basis points for the fourth time in a row when it meets next week. Traders have cut expectations for rates to peak next year to 4.86 per cent from 5 per cent a week ago.
Oil fluctuated after touching the highest level in about two weeks after US Secretary of State Anthony Blinken said a deal with Iran would be unlikely to advance in the short term.
Traders placed bets on a soaring price for aluminum as the US considers adding the metal to sanctions against Russia, a major producer. Iron ore futures slumped to the lowest since May 2020 on concern overan economic slowdown in China.