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SIGNS OF SLOWDOWN ON THE CONTINENT (1051 GMT)
Signs of an economic slowdown on the continent are beginning to show, with French industrial production and German exports both falling in March compared to February.
French industrial production fell 0.5% in March compared to February, compounding a sharp 1.2% fall in February, according to a note from ING Economics.
France's machinery and equipment and automobile manufacturing sectors were the most affected by supply chain distruptions caused by the war, with production down 3.9% and 7.3% respectively in March.
Meanwhile German exports dropped 3.3% month-on-month in March, with sanction-hit exports to Russia falling by more than 60% month-on-month, ING economists said.
Lockdowns in China, the ongoing conflict in Ukraine and rising energy and commodity price mean the short-term outlook for German exports is not encouraging, they concluded.
(Lucy Raitano)
EQUITIES: FORGET THE FED, NOW IT’S CHINA AND THE WAR (0941 GMT)
Market reaction to yesterday’s Fed decision was quite muted, with U.S. yields crashing on Wednesday before partly recovering in early London trade.
But analysts made up their minds about the impact of central banks on stocks way before yesterday.
The good news is that the story might be over or about to be over, as markets already priced in monetary tightening for the next year and perhaps even beyond.
The bad news is that investors should keep worrying about China and the war in Ukraine.
“The start of the Fed tightening process should not be seen as a negative for stocks,” as the repricing of Fed funds “is largely getting done,” JP Morgan analysts say.
“Markets continue to be hostage to the China COVID-19 response and the geopolitics, which are overshadowing what is still a very resilient fundamental picture,” they add.
JP Morgan analysts “see gains for earnings, as long as the eurozone economy expands above 1% rate this year.”
The consensus (for EPS) at around 8% looks far from aggressive. EPS revisions are down, but nothing such as seen around past recessions, they argue.
EUROPEAN TECH AND MINERS LEAD GAINS (0812 GMT)
The pan-European STOXX 600 is up 1.4%, with basic resources and tech doing the heavy lifting, both up 2.7%-2.9%.
In fact all sectors are in the green apart from insurance , falling 0.5%, weighed down by a 4.1% drop in Allianz shares.
The biggest drop is by London-listed Hikma Pharmaceuticals . Shares were last down 9.9% after the company lowered 2022 guidance for its generics business. Shares in Mondi, Unicredit, Arkema and argenx are all higher after their respective first quarter results.
(Lucy Raitano)
THE REAL BALANCING ACT (0645 GMT)
Market reaction after the U.S. Federal Reserve's 50 basis-point interest rate rise was a classic case of "buy the rumour and sell the fact". The dollar weakened, Treasury yields declined across the board and U.S. stocks jumped by almost 3%, its biggest rise in two years.
The immediate trigger was the Fed's rejection of even bigger 75 bps rate rises going forward. But all said and done, U.S. interest rates will rise by nearly 2 percentage points by year-end, if not more, and that raises some questions about the outlook for U.S. equities.
Still, Asian markets took their cues from Wall Street on Thursday. Hong Kong's tech shares index is up more than 1%, also on expectations Beijing will open the monetary spigots -- the People's Bank of China pledged policy support to help the economy after a private sector survey showed a sharp contraction in the country's services sector.
European stocks are set to open higher.
On bond markets, the Fed's signal eschewing 75 bps moves allowed rate-sensitive two-year Treasury yields to close 13 bps lower on Wednesday. That move has carried through, with Australian and German short-dated yields also lower on the day.
It's been a big week in central banking - and now after the Fed, the Reserve Bank of Australia and an unscheduled rate hike from India, all eyes are on the Bank of England.
While the Fed's decision was relatively straightforward, its counterpart in London has a trickier job at hand, trying to balance soaring inflation with growth risks caused by a cost-of-living squeeze.
For Thursday, money markets comfortably predict a quarter-point hike to 1% but a Reuters poll of economists finds some uncertainty over the future rate hike path.
Elsewhere, oil prices which rallied as much as 5% on Wednesday on news of a planned European Union ban on Russian oil, consolidated those gains. China's dire services PMI is clearly a dampener.
Key developments that should provide more direction to markets on Thursday: -Central bank meetings: United Kingdom, Norway, Czech Republic, Poland - China's services activity falls at second sharpest rate on
record - Caixin PMI -Shell posts record profit on high energy prices and trading boost
(Saikat Chatterjee)
FUTURES RALLY AHEAD OF MIDDAY BOE DECISION: (0631 GMT)
European futures are signalling a rally at the open today, with one important central bank decision down and one more to go.
Futures on the EuroStoxx50 and DAX are up 2% this morning, while FTSE futures are signalling a 1.1% rise at the open ahead of an expected 25bps hike to be announced at noon by the BoE today.
The rally tracks US indices which closed sharply up yesterday after the Fed's half a percentage point rate hike proved market expectations correct on Wednesday.
It was comments from Federal Reserve Chair Jerome Powell downplaying the chance of future 75bps hikes that prompted a state-side market celebration.
With inflation at 7%, Britain's BoE is expected to announce its fourth 25bps rate increase since late 2021 today.
In company news, Shell has reported a its highest ever profit, echoing BP's results earlier this week which showed its strongest operational performance since 2008 amid soaring commodity prices. Will calls for a windfall tax on energy companies grow louder?
Soaring oil and gas prices are not a boon for most. Reporting a bigger-than-expected quarterly loss, Lufthansa said rising fuel costs cancelled out revenue gains from booming travel demand after lifted COVID-19 restrictions.
Socgen said it would have additional costs as a result of the war in Ukraine because more customers would be unable to repay their loans.