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STOXX 600 down 0.5%
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Rate hike worries linger
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Real estate, miners lead fallers
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U.S. stock futures inch lower
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HOW TO HEDGE A MACRO-PACKED WEEK: BOFA (1210 GMT)
Are you wondering how to hedge the macro-packed calendar of the coming few days? Then Bank of America has some suggestions for you.
BofA strategists say U.S. equities seem to be more relieved about the prospect of slower Fed rate hikes than they are concerned about the point at which rates might peak and this is a mistake.
"(i) it hasn't even been a year since the hiking cycle began (yet to see lagged impact on the economy), and (ii) the Fed not hiking any faster doesn't mean they're the market's friend again," they said, adding that this already raised the risk of Fed Chair Jerome Powell sounding a hawkish note in his testimony this week - which he did.
Friday brings non-farm payrolls, a datapoint that is historically difficult to forecast, BofA says. Next week we'll get monthly consumer and wholesale inflation, as well as retail sales - all crucial pieces of data.
"Looking back at NFP reactions since 2022 reveals puts on Japan equities and US Tech as best hedges into the busy macro calendar," the team says.
(Amanda Cooper)
DAX: TECHNICAL SIGNAL SUGGESTS CAUTION (1043 GMT)
Favouring European stocks over Wall Street is a quite a popular bet among investors, who see cheap valuations and higher nominal economic growth forecasts as a good reason to put money into the Old Continent.
Among the euro equity bulls is Berenberg strategist Jonathan Stubbs, who's preferred exposure away from the U.S. since last year. However, following an already strong performance of European benchmarks relative to the U.S. since late 2022, a degree of caution looks now warranted.
According to Stubbs, in fact, a technical signal - market breadth gap - that has been working well over the past 15 yeas in anticipating market direction is now favouring U.S. equities over German ones.
"The market breadth gap, on a 200-day moving average basis, between DAX 40 and S&P 500 is at levels from which German(European) equities have historically underperformed the US. Combined with our recent analysis showing that a period of consolidation for DAX 40 is likely, this suggests investors should have more balance between the two regions in the coming months," he concludes.
RATE ANGST KEEPS STOXX DOWN (0932 GMT)
The downbeat global mood is spilling over to Europe in early trading on Thursday with the STOXX 600 falling 0.5% as uncertainty over the size of the next interest rate hike in the United States continues to grip investors.
Most sectors were down, led by rate-sensitive real estate after Germany's LEG Immobilien suspended its dividend, citing high rates and uncertainty over the value of its real estate portfolio. Miners were also big fallers as copper prices declined.
Insurers bucked the weak trend, underpinned by gains in Aviva after the company, under pressure from activist investor Cevian, hiked payouts for investors. Aerospace and defence was also in demand with BAE rising to a new record peak on optimism over submarine deals within the AUKUS security pact between Australia, the UK and the U.S..
Around 82% of the STOXX was trading in the red.
(Danilo Masoni)
EUROPE SET FOR SOFTER START (0729 GMT)
European shares were expected to open a touch lower on Thursday as investors continue to ponder the outlook for rates following remarks by Fed Chair Jerome Powell and ahead of the closely watched U.S. jobs market report on Friday.
EuroSTOXX50 and FTSE futures were both down around 0.3%, with an eye also on earnings releases that continue to trickle in as the Q4 season draws closer to an end.
Deutsche Post raised its dividend after a record 2022, but flagged a challenging year ahead, while fashion house Hugo Boss forecast 2023 sales to grow at a mid-single-digit percentage rate, slower than last year.
In the UK, Harbour Energy announced a new 200-million share buyback, as higher oil prices helped the British North Sea's biggest oil and gas producer treble its cash flow.
Insurer Aviva, under pressure from activist investor Cevian Capital to increase returns, unveiled a 300-million pound buyback after its operating profit rose.
Eyes are also on Credit Suisse. The Swiss bank has delayed the publication of its annual report after the U.S. SEC raised questions about its earlier financial statements, in the latest blow for the company.
(Danilo Masoni)
IS CHINA EXPORTING DEFLATION? (0651 GMT)
Factory-gate prices stopped falling in China last month, but did not rise and in annual terms remain negative - a welcome piece of news on Thursday for Western central bankers who are starting to run into difficulty in heading off sticky inflation.
Relief wasn't immediate, as the figures were tinged by doubt on the robustness of China's consumption rebound, with inflation in the country also at its slowest in a year.
But with several months' data now published since the end of China's restrictive zero-COVID-19 stance, there's some weight behind analysts' contention that the reopening of the world's second-biggest economy won't set off a new inflationary pulse.
Unemployment and the lack of stimulus handouts are widely expected to keep the temperature of local demand in check, while a global slowdown is also likely to cool price pressure on exports.
That's likely welcomed since analysts are making their latest upward revisions to U.S. and European interest rate expectations and do not need another inflationary shock from China's reopening.
European futures steadied in Asia as markets assumed a holding pattern with the focus on U.S. data as the driver of interest rate movement.
As some of the dust settles on U.S. Federal Reserve Chairman Jerome Powell's hawkish testimony at Congress, Fed funds futures steadied, perhaps a signal economists - who have been jacking interest rate forecasts toward a peak near 5.75% or 6% - may finally have done enough.
U.S. jobless claims data later on Thursday offers an entree for a blockbuster jobs report on Friday that could make or break market pricing for a 50-basis-point Fed hike later in March.
The Bank of Japan concludes a two-day meeting on Friday, though it is increasingly dancing to its own beat.
A falling yen is among signs that efforts to deter short-sellers in the bond market are working and speculation for a policy shift at what will be Governor Haruhiko Kuroda's final meeting in charge seems to have ebbed from earlier fever-pitch levels.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%; Japanese stocks rose 0.6% on Thursday.
Key developments that could influence markets on Thursday:
Economics: U.S. jobless claims
Speakers: Riksbank officials AinoBunge and Per Jansson, Bank of England's Sarah Breeden, Bank of Canada's Carolyn Rogers
(Tom Westbrook)
