Morning Bid Europe

A look at the day ahead in European and global markets

By Kevin Buckland, Correspondent

Europe wakes up to more weakness in equities after stock markets across Asia took cues from Wednesday’s slump on Wall Street.

Fears that the US could slip into recession weighed broadly. But perhaps reassuringly, financials fared relatively better in markets including Hong Kong and Tokyo, suggesting little fear of widening contagion from First Republic’s woes.

Technology shares in the region didn’t benefit much from Microsoft’s earnings boost though, which had buoyed the Nasdaq. The Hang Seng’s tech sector, in particular, slumped more than 1%, with the mood soured by the U.S. Commerce Secretary’s warning that Chinese cloud computing companies may pose a national security threat.

A trader works at the stock exchange in Frankfurt, Germany, February March 9, 2020. REUTERS/Kai Pfaffenbach

Meanwhile, the United States continued to cozy up to long-time regional allies South Korea and Japan.

The Yomiuri newspaper reported the trio are preparing to hold a summit on May 21 on the sidelines of the Group of Seven summit that Japan is hosting over that weekend.

Overnight, a meeting in Washington between President Joe Biden and South Korean leader Yoon Suk Yeol produced a pledge from the United States to give its East Asian partner more insight into its nuclear planning over any conflict with North Korea.

Away from geopolitics, the Bank of Japan began its first policy meeting with new governor Kazuo Ueda at the helm. While the consensus is for no change to ultra-easy stimulus settings on Friday, no one is willing to rule out another surprise like in December, when former governor Haruhiko Kuroda wrong-footed investors with a doubling of the 10-year bond yield band.

Thursday’s economic data calendar from Europe is light fare with just a handful of Eurozone sentiment indexes, consumer and business sentiment readings for Italy, along with retail sales and the jobless rate in Spain.

The meatier indicator comes later, in the form of U.S. advance GDP for the first quarter, with 2% annualised growth expected.

The U.S. reporting season also continues apace, with some of the day’s highlights to include Mastercard pre-open, Caterpillar during the day and Amazon and Intel after the bell.

Looming over everything though is the continued standoff in the US over extending the debt ceiling, as the bill passed by House Republicans overnight – including sweeping spending cuts – has already been called DOA by top Senate Democrat Chuck Schumer.

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Key developments that could influence markets on Thursday:

U.S. advance GDP
U.S. earnings including Amazon, Intel and Caterpillar
Debt ceiling negotiations

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