STOXX 600 down 0.9%
*
Euro zone PMI at 20-month low of 48.1
*
New Zealand raises rates to 7-yr high
*
Eyes on U.S. ADP report, ISM service
*
U.S. stock futures fall
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at
EUROPE'S EARNINGS RESILIENCE EXPLAINED (0850 GMT)
Hawkish central banks, the energy crunch, spiralling inflation and not least the war in Ukraine haven't been enough to deter sell-side financial analysts from raising their earnings forecasts for Europe Inc.
That may be surprising, but there's actually an explanation which BofA Global Research breaks down into 5 points.
1. Strong energy EPS upgrades helped by higher oil prices and stronger refining margins
2. Rising inflation providing a mechanical lift to EPS
3. Spiking bond yields supporting earnings momentum for financials
4. Euro weakness boosting foreign earnings
All that being said, BofA stays negative on European stocks, betting that macro headwinds will eventually start to bite.
"Our top-down analysis suggests that the EPS cycle is at a peak, with our macro projections pointing to 20% downside for STOXX 600 12-month forward EPS by mid-next year as growth slows, margin pressures intensify and the boost from the recent support factors fades," says the U.S. bank.
COST OF LIVING CRISIS HITS GROCERY STORES (1003 GMT)
Traditionally, supermarkets would be considered a good hedge in a recessionary environment, but this time around the scale of the cost of living crisis in the UK means shares in supermarkets are far from being considered the safest pick.
"Supermarkets are no strangers to dealing with cost-of-living pressures," says Matt Britzman, Equity Analyst at Hargreaves Lansdown. "Pain is slowly starting to feed into performance, as shopping behaviours continue to normalise from bumper levels seen over the pandemic and inflation keeps costs high."
Britain's biggest retailer Tesco has just reported results and modestly lowered its profit guidance blaming uncertainty over how a worsening cost-of-living crisis would affect consumer spending.
“In an environment where consumers are being assailed from all sides by mounting energy bills, rising interest rates and higher costs for all manner of goods and services you are much better off selling essential staples than discretionary items," says AJ Bell investment director, Russ Mould.
However, he adds “Tesco has to try and offer attractive prices to stave off the competitive threat from the German discounters Aldi and Lidl and while it can rely on its purchasing power to some extent, it is still having to sacrifice margins to meet this challenge".
THE REAL ESTATE DILEMMA (0840 GMT)
Real estate stocks went through an horrific September, especially in Europe, as hawkish policymakers cracked on with big interest rate hikes, piling pressure on the highly leveraged industry.
Fact is, globally the sector is now extremely cheap which faces investors with the question of whether time is ripe to become less bearish. The decision ultimately lies on expectations around the direction of interest rates.
UBS looks somewhat optimistic.
"The key question is ‘are we moving to a regime of structurally higher rates, or are inflationary pressures passing, relieving the upward pressure on cap rates?'. The UBS view is the latter: inflationary pressures are easing and our economists see the Fed hiking to year end but back to cutting by the end of 2023," say analysts at the Swiss bank.
"This, in turn, could ease the downside pressure on the sector," they add. According to UBS, real estate trades at a rare 29% discount to net asset value (NAV).
STOXX SNAPS 3-DAY RALLY (0743 GMT)
European shares kicked off the day on the back foot with the STOXX 600 down slightly following a three-day bounce that took the pan-regional benchmark index off near 2-year lows.
The index was last down 0.2% and most sectors fell as traders turned their focus to upcoming macro data to corroborate bets that central banks could shift down a gear in their fight again inflation.
Here's your opening snapshot:
EUROPE: BOUNCE OVER? (0638 GMT)
After three session of gains culminating in the biggest one-day jump since March for Europe's STOXX 600 benchmark, the equity market bounce seems to have reached its end point.
Doubts over whether we really are closer to a policy pivot by the Fed are creeping back in, and investors will want more proof from incoming data that the U.S. labour market and inflation are indeed cooling.
The U.S. jobs report on Friday will be key for short-term market direction, though investors will also keenly watch the ISM service index and the ADP employment survey on Wednesday.
European futures were last down around 0.6% and U.S. equity derivatives also pointed to a weaker start later on.
In corporate news, Tesco forecast FY core profit to be around the lower end of its previous guidance, saying there were uncertainties over the macro outlook. Traders however expect its shares to rise, citing better than expected UK sales.
RETWEET OR LIKE? (0605 GMT)
Elon Musk has had another change of heart and wants to proceed with his $44 billion bid to take Twitter Inc private, while an OPEC+ plan for a deep cut to global oil supplies has added to gloom in financial markets.
That's more chaos and confusion for a market already frustrated by the missteps of Britain's new government and more gossip about embattled Swiss bank Credit Suisse. Yet stock markets are up, the dollar is down and investors are latching on to some signs that global monetary hawkishness may have peaked.
Overnight, U.S. job openings fell by the most in nearly 2-1/2 years in August, which investors were quick to jump on as a sign the Fed could now be less aggressive. Stocks across the globe have risen, and a slew of data from Europe on Wednesday will provide investors with more clarity.
Meanwhile, just a day after a dovish turn by the Reserve Bank of Australia, New Zealand's central bank was assertively hawkish and determined to keep raising rates.
Sterling also weakened on Wednesday, giving up some of its sharp gains from record lows a week ago. Liz Truss will be back in the headlines on Wednesday as the UK prime minister presses her message that Britain needs "to do things differently" to kickstart stagnant growth.
In her first speech to the party faithful as Conservative leader, Truss will hope to regain some of the trust after a dramatic a U-turn this week on one of her tax cuts.
Key developments that could influence markets on Wednesday:
ZURICH - Board Member Andrea Maechler of the Swiss National Bank (SNB) speaks at an event about inflation, rates -1130 GMT
ATLANTA - Federal Reserve Bank of Atlanta President Raphael Bostic speaks – 2000 GMT.
STOCKHOLM – Riksbank executive board meeting – 0700 GMT.
U.S. 4-month T-bills auction
Economic data – Germany trade, France industrial production, Euro zone services PMI, U.S. ISM non-manufacturing PMI, U.S. international trade, Brazil industrial production