MARKET WRAPS
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EU ECB rate decision, ECB podcast with President Christine Lagarde, European Investment Bank annual press conference; U.K. Bank of England monetary policy report, interest rate decision; Germany foreign trade; trading updates from Ferrari, Julius Baer, Siemens, Banco Santander, Deutsche Bank, Siemens Healthineers, Infineon Technologies, Publicis Groupe, ABB, Roche Holding, Telenor, BT Group, Shell, ING Group, SKF AB, Danske Bank, Anglo American, Sage Group, Compass Group, CNH Industrial, Airtel Africa, Bollore, Renishaw
Opening Call:
Shares could open higher in Europe on Thursday. In Asia, stock benchmarks were broadly higher; Treasury yields fell; the dollar weakened; while oil and gold gained.
Equities:
European stocks are set to rise Thursday, tracking overnight gains on Wall Street and as investors brace for a slew of corporate earnings and rate decisions by the European Central Bank and the Bank of England.
U.S. stocks rose after the Federal Reserve raised its policy interest rate by 25 basis points, as widely expected, and signaled that only a few more might be needed in its inflation fight.
The Fed appears to be approaching a point at which it can consider pausing interest-rate increases, said Phillip Neuhart, director of market and economic research at First Citizens Bank Wealth Management.
However, Neuhart said he believes the Fed won't be in a rush to lower rates anytime soon.
"For everybody, there is a level of data dependency. It's telling us what to expect for the coming weeks or months from the central banks," said Seema Shah, chief global strategist at Principal Asset Management.
"Our focus is still on inflation and the labor market and what that means for the Fed."
Pictet Asset Management said, "the focus is on how the real economy can digest what central banks have done. So all eyes are on the earnings season and what cues we can get on a soft landing."
Read: The Federal Reserve raises interest rates: here's what that means for the market
Forex:
The dollar was weaker early Thursday amid risk appetite spurred by signs of a potential Fed pause.
Fed Chair Powell said the "disinflation process" in the U.S. has started, RBC Capital Markets said.
While there was some speculation before the FOMC decision that the Fed would push a hawkish message, what happened was very different as the Fed seemed to be getting comfortable with the impending pause to its tightening cycle, it added.
"Powell was rather dovish as he failed to convince markets that the December dot plots could still happen," Oanda's Edward Moya said.
"Powell added that they don't see a rate cut this year, but it appears no one is believing that."
Bonds:
Treasury yields were lower across the board after the Federal Reserve delivered an expected rate hike and remarks by Chair Jerome Powell failed to dissuade investors from expecting the hiking cycle to soon come to an end.
Wells Fargo's Jay Bryson said "bonds rallied on Powell's comment that the disinflationary process has started without notable weakening in the labor market. It appears that markets are increasingly buying into (hoping for?) the 'soft landing' scenario."
Bryson forecasts a "mild recession" this year, while acknowledging that a soft landing isn't impossible.
"The Fed is essentially speaking out of both sides of the mouth as they signaled further increases are appropriate, but also acknowledged they will consider the cumulative amount of tightening in future policy decisions," Allianz Investment Management said.
"This tells us that the Fed is near the end of the tightening cycle, and they are getting ready to sit tight while the economic data catches up to the policy," it said.
"Slowing the pace of rate hikes is a clear sign that the Fed is getting comfortable with the idea that the prescribed policy for the economy is finally starting to work. On balance, the meeting tilted slightly dovish, and the end of the tightening cycle appears to be on the horizon."
Energy:
Oil futures were higher in Asia, in line with broad strength in global commodities markets following Fed chair's remarks that interest-rate increases have started to cool down inflation.
While easing rate-hike expectations have been driving up a host of commodities prices, analysts at Galaxy Futures advised caution.
They expect oil to continue experiencing volatility in the near term.
While China's domestic oil demand is set to rebound, a mixed bag of factors such as rising geopolitical tensions and a potential global recession heighten uncertainty for oil prices, the analysts said.
Oil traders are also factoring in the OPEC+ committee's recommendation for the Organization of the Petroleum Exporting Countries and their allies to keep their current production policy in place.
The energy complex is weak and could get even weaker, with any additional weakness likely offering an "opportunity to add to long positions," Tariq Zahir, managing member at Tyche Capital Advisors said.
"With the reopening of China and recent strength in several other commodities, we feel the risk is to the upside in the energy complex."
Metals:
Gold prices rose in Asia, tracking broad gains in global stocks and commodities after Fed Chairman Powell acknowledged that interest-rate increases had begun to pull inflation lower.
Gold could continue oscillating in the near term, as investors weigh the future direction of global central banks, Galaxy Futures analysts said.
Recent stronger-than-expected macroeconomic data from the U.S. and Europe may mean that central banks would maintain their hawkish stance for longer, they said and advised against chasing any upturns too aggressively.
However, Adam Koos, president of Libertas Wealth Management Group, said "between rate hikes plateauing as expected and the U.S. dollar heading lower, gold is benefiting from an economic tailwind amongst blue skies."
"The keys to higher prices in gold are going to be rates and the dollar. We all know rates are going to plateau, so all eyes will be on the USD, as gold's final gatekeeper toward all-time-highs and beyond," Koos said.
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Base metals prices were higher after Fed Chair Powell signaled less tightening, which was being seen as positive for economy, and for metals demand.
Market participants had a dovish takeaway from Powell's acknowledgement of progress in the "disinflationary process" and that he isn't concerned about loosening financial conditions, IG said.
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Chinese iron-ore futures fell, erasing some of the gains in recent days as investors take a breather from the latest rally.
Although prices have retreated slightly, market expectations for the ferrous metals are strong given Beijing's support to the property sector, CSC Financial analysts said.
However, they suggested that investors remain cautious as property sales and new construction starts remained sluggish.
TODAY'S TOP HEADLINES
Fed Slows Its Tightening With Quarter-Point Interest Rate Rise
WASHINGTON-The Federal Reserve nudged up short-term interest rates by a quarter-percentage point and signaled it was on track to do so again at its meeting next month while officials consider whether and when to pause increases late this spring.
The decision Wednesday to raise the Fed's benchmark federal-funds rate followed six larger, consecutive increases to combat inflation, which hit a 40-year high last year. Officials raised rates by a half point in December and by 0.75 point in November.
Airbus Revives Order From Qatar Airways Following Paint-Dispute Settlement
LONDON-Airbus SE agreed to revive orders for close to 75 aircraft from Qatar Airways after reaching a settlement with the Middle East airline over a long-running dispute about chipping paint on its A350 wide-body models.
A spokesman for Airbus said it would now go ahead with delivering 50 A321 narrow-bodies and 23 remaining A350 twin-aisles previously ordered by Qatar.
EU Tightens Oversight of Data-Privacy Regulators to Speed Up Decisions
European officials are introducing a new oversight process to monitor major data-privacy investigations following criticism of the glacial pace of enforcement, particularly against multinational tech firms.
Regulators that handle large-scale cases affecting people in more than one European Union country will need to report on their progress every other month to the European Commission, the EU's executive arm. The commission disclosed the new procedure in response to a complaint alleging that the commission itself had violated EU law by not properly overseeing the Irish privacy regulator.
U.K. Hit by Biggest Strikes in a Decade
LONDON-Britain was hit by the largest strikes in a decade on Wednesday as workers from train drivers to teachers to civil servants walked off the job for the day, forcing millions of children to miss school and commuters to stay home.
The strikes reflect a growing challenge to the U.K. and some European countries of how to address falling real wages for many public-sector workers without further stoking inflation or damaging public finances after years of high spending. France has also been hit by strikes in recent months, fueled by anger over wages not keeping pace with the highest inflation in decades.
Meta Gets Back to Reality
Hindsight is always 20/20 but, looking back, it was all there in not-so-fine print.
Facebook-parent Meta Platforms' surged 18% in after hours trading Wednesday following an earnings report that included a first quarter outlook that was better than feared. It came just one day after social media competitor Snap, Inc. painted an ominous picture of its own near-term business prospects, noting revenue was down about 7% quarter to date year on year.
Amazon Cited by Labor Department for Hazards at Three Additional Warehouses
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02-02-23 0015ET
