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STOXX 600 down 0.1%
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Banks hit 7-week high
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Canada makes surprise rate hike
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Nasdaq futures steady
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FED-INDUCED RECESSION: WHERE ARE YOU? (0936 GMT)
The impact of monetary policy on the real economy takes a while to trickle through, so expecting a recession to strike during the early phases of the Federal Reserve's tightening cycle would have been naive.
But after over a year of U.S. rate hikes against the backdrop of an inverted yield curves and talk of an impending downturn, a recession looks elusive. Not to mention the recent buoyancy seen on Wall Street and other equity markets.
Alvaro Sanmartin, Chief Economist at investment firm Amchor IS in Madrid, believes U.S. economic data continues to be too solid to reasonably expect a recession in the second half of the year. His case is based on four elements.
"First, aggregate demand in the US and Europe enjoys strong fundamentals. Secondly, these good fundamentals and the huge fiscal and monetary stimuli implemented during the pandemic have contributed to a situation of excess demand, which in turn has led to significant inflationary pressures," he says in a note.
"Third, as a consequence of the above, restrictive monetary policies maintained over a relatively long period of time are now necessary to moderate both inflation and wages. Fourth, the fact that inflation expectations remain reasonably anchored makes it possible to control inflation without a recession".
According to last month's BofA survey of global fund managers, global growth expectations reached the worst year to date. Still, a majority of 63% were in the soft landing camp.
(Danilo Masoni)
STOXX SLIPS AS TRADERS MULL RATE OUTLOOK (0810 GMT)
The European STOXX 600 is down 0.1%, with market attention staying on the outlook for global interest rates, after hikes from the Australian and Canadian central banks this week, while the coming weeks will see more meetings from the Fed, ECB and BoE.
Interest-rate sensitive tech names are down 1.3% and the worst off sector. Meanwhile, basic resources and euro zone banks are the biggest winners, up around 1% each.
Sweden's SBB is the index's biggest loser, down 9.3%. The stock rose by more than 50% on June 2 after the troubled real estate company appointed a new CEO. It had risen for three consecutive trading days. S&P cut its rating on SBB debt deeper into junk territory on Thursday. Germany's Evotech is up 7.5% after an upgrade from Citigroup.
In the UK, shares in property developer Crest Nicholson are down 3.6% after it posted a more than 60% drop in profit and warned of a further slowdown in the British housing market.
But transport operator FirstGroup is stealing the show, up 12.7% after a full-year profit beat.
(Lucy Raitano)
UK STOCKS TO AVOID STEEPER EUROPEAN FALLS (0628 GMT)
European futures are signalling drops at the open, though UK stocks might come under less pressure, as market attention stays on central bank rate hikes and the outlook for global growth.
Futures on the Eurostoxx and Germany's DAX are down around 0.4%, while FTSE futures are flat. E-mini S&P 500 futures are down 0.1%.
An OECD forecast on Wednesday predicted Britain will have the highest inflation of any leading economy in 2023, while a separate industry survey showed Britain's housing market showing some improvement in May, but further interest rates increases by the Bank of England are expected to put more pressure on demand and on prices in the coming months.
The OECD said global economic growth will pick up only moderately over the next year as the full effects of central bank rate hikes are felt.
Central banks remain at the top of investors' priority list. The Bank of Canada on Wednesday hiked its overnight rate to a 22-year high of 4.75%, while the Reserve Bank of Australia (RBA) delivered a surprise hike on Tuesday.
The Fed will meet next week as will the ECB, with the Bank of England to follow on June 22.
(Lucy Raitano)
O CANADA! MARKETS WARY OF FED HAWKISH SURPRISE (0610 GMT)
Another day, another surprise hike. After the Reserve Bank of Australia's surprise earlier this week, it was the Bank of Canada's turn to stun markets with a 25 basis-point hike that led traders to dial back expectations of the U.S. Federal Reserve standing pat next week and sweat over the policy outlook.
Broader consensus is that the Fed will do at least one more hike. The question is whether it comes next week or in July. The CME FedWatch tool showed the probability of the Fed hiking by 25 bps next week is 36%, it was 22% a day earlier.
More than 90% of economists, 78 of 86, polled by Reuters said the policy-setting Federal Open Market Committee would hold its federal funds rate at 5.00% to 5.25% next week. More than a third though expect the Fed to raise rates at least once more this year.
And so, investors are in a tetchy mood, with the MSCI Asia ex-Japan a bit lower, the U.S. dollar index flattish and U.S. Treasuries holding on to gains in Asian trade.
With a light data calendar and futures pointing to a mixed open in Europe, markets could drift on Thursday. Next week's series of central bank meetings will remain at the forefront of market minds.
Meanwhile, revised data showed Japan's economy grew more than initially thought in January-March, helping the yen strengthen.
In the corporate world, GameStop ousted its CEO and made Ryan Cohen, the billionaire investor whose bet on the video retailer made him popular among meme stock traders, its executive chairman.
Coinbase CEO Brian Armstrong hit back at U.S. Securities and Exchange Commission Chair Gary Gensler over the agency's lawsuit against the crypto exchange, calling him an "outlier" while reassuring customers their funds were safe.
Key developments that could influence markets on Thursday:
Economic events: euro zone Q1 GDP and employment data
(Ankur Banerjee)
