Investors await ECB rate decision
With inflation in the euro zone projected to rise to at least 10% in the coming months, a “jumbo” rate hike of 75 basis points on is certainly a possibility.
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The euro rose against the dollar and the British pound Wednesday morning, as the European Central Bank prepared for a crucial policy meeting Thursday.
The ECB is expected to frontload a series of rate hikes and sacrifice growth in the region in a bid to tame inflation of 9.7%, which is forecast to rise further.
A “jumbo” rate hike of 75 basis points is a possibility and has been largely priced in by markets, Berenberg analysts said.
Sterling struggles as new PM takes office
The British pound was down against the U.S. dollar and the euro Wednesday morning, as new prime minister Liz Truss began her first full day in office.
Sterling was trading at $1.1495 at 8:30 a.m. London time, down 0.17% on the previous day, keeping it around the lowest level it has traded at since the 1980s.
Analysts at ING said traders would be processing reports published Tuesday that Truss is planning to freeze energy bills at a cost of £130 billion and provide billions more in business support, which would likely impact the U.K.’s growth outlook and debt position.
The euro was up 0.17% on the pound at 0.8611, ahead of the European Central Bank’s Thursday policy meeting, when it is expected to announce a 50 or 75 basis points rate hike.
The EU’s central currency was up 0.02% against the greenback at $0.9902 after dropping below the 99 cent level Monday.
— Jenni Reid
Nomura cuts its China GDP forecast — again
Nomura has cut its forecast for China’s full-year GDP to 2.7%, another downgrade from its previous 2.8% estimate set in August.
The new outlook is based on Nomura’s analysis that found 12% of China’s GDP is affected by Covid controls on a weighted basis, up from 5.3% last week.
Several cities including the tech hub of Shenzhen have tightened Covid controls in the last few weeks after reporting new local infections. Chengdu has also ordered people to stay home while authorities conduct mass virus testing.
Read the full story here.
–Evelyn Cheng
CNBC Pro: Russia-Europe tensions could spur a ‘bullish shock’ to oil markets
Oil and gas stocks are set to get a boost from heightened tensions surrounding Russian gas supplies to Europe, according to one analyst.
Kenny Polcari, chief market strategist at SlateStone Wealth, told CNBC’s “Street Signs Asia” that investors should zoom in on big U.S. energy names which are also good dividend payers.
One stock he named is up 125% this year, and he says there’s more “room to run.”
Pro subscribers can read more here.
— Weizhen Tan
Oil prices fall on expectations of further rate hikes and lower demand growth
Oil prices fell on Wednesday following more Covid curbs in China and expectations of more interest rate hikes globally.
The U.S. West Texas Intermediate futures fell 1.45% to stand at $85.62 per barrel, while Brent crude futures slid 1.14% to $91.77 per barrel, erasing earlier gains following the latest OPEC+ meeting and its decision to pare output.
A Reuters forecast expects WTI to extend its downtrend to reach $83.17 per barrel.
—Lee Ying Shan
CNBC Pro: This chip stock has convincingly beaten its peers this year – and analysts think it can go higher
After years of market beating returns, semiconductor stocks have sold off heavily this year. But one stock has emerged relatively unscathed from the market carnage. Not only has it outperformed its peers, it has beaten the S&P 500 by a country mile.
And analysts think the stock can still go higher.
Pro subscribers can read more here.
— Zavier Ong
US Treasury yields hit highest levels since mid-June
A bond selloff has boosted U.S. Treasury yields to their highest levels since mid-June as investors weigh what strong economic data means for the Federal Reserve’s future rate hikes.
The U.S. 10-year Treasury yield rose as much as 3.353%, the highest level since June 16, when the yield hit 3.495%. Yields are inverse to prices.
The yield on the U.S. 30-year Treasury hit a high of 3.484% and the U.S. 5-year Treasury yield hit 3.334%, also both the top levels seen since mid-June.
The 2-year yield also rose to a daily high of 3.535%, but it is only the highest yield for the note since Friday.
– Carmen Reinicke
European markets: Here are the opening calls
European stocks are expected to open cautiously higher on Wednesday with the U.K.’s FTSE index seen 18 points higher at 7,560, Germany’s DAX 33 points higher at 13,944, France’s CAC 40 up 18 points at 6,616 and Italy’s FTSE MIB up 42 points at 23,029, according to data from IG.
Data releases include preliminary euro zone unemployment data for the second quarter as well as second quarter gross domestic product. The latest U.K. inflation numbers for July will be released as well as preliminary second quarter Dutch GDP.
Earnings come from Uniper, Carlsberg, Persimmon, Balfour Beatty, BAT and National Grid.
Read More: European markets slump at the open as recession fears grow