Live Markets: Drawing the battle lines
22/07/2022 07:56
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DRAWING THE BATTLE LINES (0655 GMT)
For all the excitement about the European Central Bank's
first rate hike since 2011 and the launch of a new tool to
contain a blowout in borrowing costs, the euro and core bond
yields are back to levels where they were before Thursday's
meeting.
As pleased as bond vigilantes may be that the ECB has not
wasted any time in hiking by a more aggressive 50 bps and still
thinks it should be able to repeat that feat in September, for
markets the TPI (Transmission Protection Instrument) appeared to
be strong on promises but weak on detail. urn:newsml:reuters.com:*:nL8N2Z2681
The ECB may be able to finesse that and clear some of the
market confusion in time, but the question remains what happens
if markets have reason to test it sooner?
Throw into the mix an expectation that soft U.S. economic
data this week will not deter the Federal Reserve from raising
interest rates by another whopping 75 bps next week even as the
economy slows under the weight of soaring inflation.
So, it's not surprising that investors are singing a gloomy
tune on Friday.
World stocks are set to snap a three-day rising streak, the
U.S. dollar index has rebounded smartly from Thursday's lows and
the Treasury yield curve, a gauge of recession risks, is pushing
deeper into negative territory.
U.S. stock futures are in the red thanks to grim earnings
from social media darling stock Snap Inc SNAP.N sending its
shares down by 25%. That's a reminder that stock punters are
quick to dump richly valued mega cap stocks at the first signs
of trouble. urn:newsml:reuters.com:*:nL1N2Z22MN
Key developments that should provide more direction to markets
on Friday:
Italy's national election will be held on Sept. 25,
government source told Reuters on Thursday. urn:newsml:reuters.com:*:nS8N2Y4023
PMI: France, Germany, EU Composite, UK
UK retail sales fall by 0.1% in June urn:newsml:reuters.com:*:nL8N2Z26SG
Schindler cuts 2022 revenue guidance on China slowdown
urn:newsml:reuters.com:*:nL8N2Z30GL
(Saikat Chatterjee)
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ECB HANGOVER, ITALIAN POLITICAL TURMOIL IN FOCUS (0640 GMT)
Euro zone futures are trading lower the day after the
European Central Bank raised interest rates by more than
expected in its first hike in 11 years, bolstering economic
growth slowdown fears.
In the meantime, Italian futures are underperforming, down
0.7% as the political crisis widened in Italy sending tremors
through financial markets. Italy will hold a snap national
election on Sept. 25 after Prime Minister Mario Draghi resigned
following the collapse of his national unity government.
urn:newsml:reuters.com:*:nS8N2Y4023
ECB concerns about runaway inflation trumped worries about
growth. But that added to pressures on EZ stocks as the euro
zone economy is suffering from the impact of Russia's war in
Ukraine.
EZ futures are between flat and 0.7% lower, while London
FTSE futures are up 0.2%.
The ECB raised its benchmark deposit rate by 50 basis points
to zero percent. urn:newsml:reuters.com:*:nL1N2Z20BK
Next, the U.S. Federal Reserve meets next week and
expectations of a 100 bp hike have faded in favour of pricing
for a 75 bp move. FEDWATCH
(Joice Alves)
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