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STOXX 600 down 0.6%
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Polish incident lifts defence stocks
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Autos, real estate top sectoral fallers
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British inflation hits 41-year high
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U.S. stock futures flat to higher
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BULKAMANIA: DIVIDEND UPGRADES COMING (1110 GMT)
RBC Capital Markets sounds bullish on UK life insurers and that optimism boils down to what it calls "bulkamania".
The Canadian-based bank bets on an "unprecedented" demand for bulk annuities stemming from this year's dramatic jump in long yields and sees fatter dividend payouts for investors.
"Our analysis reveals a stepup in demand for bulk annuities which should significantly exceed supply, underpinning our expectation for an increase in volumes, written at better margins and improved capital strain," say RBC analysts.
"The long-term capital generated by higher new business should support additional dividend capacity of 35% of the sector's market cap and drives our updated expectation for higher than consensus dividend growth rates," they add.
At an average 2023 dividend yield of 8.4%, RBC sees a buying opportunity here and notes how the sector has lagged the market by 25% since COVID-19.
It is overweight on Just Group, L&G, Aviva and Phoenix.
AN UNENVIABLE JOB FOR THE BOE (1042 GMT)
Today's British inflation numbers are set to give the Bank of England more sleepless nights. Consumer prices rose 11.1% in October, the most since October 1981 and well above the central bank's 2% target.
BoE governor Andrew Bailey and other policymakers will no doubt be in for a bumpy ride when they testify in front of lawmakers later.
And it could have been even worse. The Office for National Statistics said inflation would have been even higher had it not been for government intervention to limit the price of household energy bills.
"With significantly higher mortgage rates and energy and food bills, plus universal tax hikes to be announced tomorrow, setting monetary policy has never looked more challenging," says James de Bunsen, multi-asset fund manager at Janus Henderson Investors.
The market reaction has been relatively subdued which according to de Bunsen suggests that the data won't precipitate a more hawkish stance from the BoE. Markets are currently fully pricing in a 50 basis point rate hike next month with around a 40% chance of a second straight 75 bp hike.
For the pound, higher inflation is a "double edged sword", according to Matthew Ryan, head of market strategy at Ebury.
"On one hand, it increases the chances of aggressive rate hikes from the BoE, though on the other, it suggests that a deeper and more prolonged downturn in the UK economy may be on the horizon," Ryan says.
Eyes are now set to turn to Bailey's testimony at 1415 GMT and tomorrow's Autumn Statement from finance minister Hunt where tax rises and spending cuts are likely to be announced.
According to de Bunsen, Hunt "will seek to reassure markets that a grown-up is in charge again, but will also undoubtedly serve to all but extinguish any last flickers of consumer exuberance."
Tough times ahead for British households.
STOXX DOWN DESPITE DEFENCE, OIL BOOST (0926 GMT)
European shares fell slightly in early trading on Wednesday, setting the STOXX 600 for its first down-day in five and possibly signalling that markets need fresh positive catalysts to extend their bounce from October lows.
The missile incident in Poland and UK inflation at fresh 41-year highs clearly didn't provide any reason for investors to push prices higher. So, even as defence stocks rose on the prospect that military spending will remain high and energy got a boost from higher crude oil, red signs prevailed.
The pan-European equity benchmark index was last down 0.5%. Autos and rate sensitive real estate led sectoral fallers, down 2.9% and 2.7% respectively.
EUROPE EYES MUTED START (0738 GMT)
Stock index futures are pointing to a muted start in Europe this morning, recovering from an overnight drop after U.S. President Joe Biden said a missile that killed two people in Poland was probably not fired from Russia.
Euro STOXX 50 futures were last trading just above parity, while FTSE 100 futures inched 0.1% higher even as data showed UK inflation rose to a new 41-year high of 11.1% in October.
Trading in Asia was shaken by the missile blast in Poland, while U.S. futures were last edging slightly higher, adding to gains on Tuesday that were fuelled be benign inflation data.
In corporate news, early calls pointed to gains for aerospace contractor Senior and grocer Premier Foods following results. French train maker Alstom is also seen rising after cash flow and orders beat forecasts.
Siemens Energy scrapped its dividend after its net loss widened because of turmoil at its wind turbine division. Cruise operator Carnival is set for a difficult day after a $1 billion convertible bond offering whose proceeds will help it make principal payments on debt.
A MISSILE AND A MANIFESTO (0658 GMT)
U.S President Joe Biden said a missile that killed two people in Poland may not have been fired from Russia. That comment will be relief to a market rattled at the prospect of the war in Ukraine spilling over to neighbouring countries, but investor's nerves are frayed and they remain on guard.
A volatile round of trading overnight due to the explosion on Tuesday at a grain facility near the Ukrainian border has continued into Asian hours, with equities lower, the dollar on the front foot and gold prices hovering around a three-month peak.
Meanwhile, Donald Trump launched a bid to regain the presidency in 2024, a move that was widely expected and telegraphed. "Two years ago, we were a great nation and soon we will be a great nation again," he said in a speech that lasted little more than an hour. With the elections a couple of years away, markets didn't seem to care.
Britain is due on Wednesday to release inflation data for October that is expected to show consumer prices up 10.7% on a year earlier. The data will come just a day ahead of Finance minister Jeremy Hunt's autumn budget, which is expected to contain a raft of measures, including tax rises and spending cuts.
In the crypto world, the FTX saga rumbles on, with bankruptcy filings showing the collapsed exchange may have more than 1 million creditors. Meanwhile, the Wall Street Journal reported that lender BlockFi was planning layoffs and a possible bankruptcy filing.
Key developments that could influence markets on Wednesday:
Economic events: CPI data from Britain and Italy
Speakers: ECB board member Frank Elderson, Edouard Fernandez-Bollo, BoE governor Andrew Bailey to be questioned by parliaments' Treasury committee
