MARKET WRAPS

Stocks:

European shares struggled for momentum on Thursday in a cautious opening session and as the European Central Bank readies its second rate hike in three months.

A little more than a month after the Federal Reserve delivered a second consecutive 0.75 point interest-rate increase, many analysts believe the ECB is set to step up the pace of its tightening to match.

"There's a long way to go to get inflation in check which makes a 75 basis point hike all the more reasonable," wrote OANDA's Craig Erlam.

"This is the problem with starting the process so late and learning nothing from the experience of other central banks this year, the ECB is forced to play catch up quickly and the economy could suffer the consequences."

Here's what analysts are saying ahead of the 'coin-toss' ECB decision.

Stocks to Watch:

European airlines face a heightened risk of bankruptcy as questions mount over whether the summer's pent-up demand for travel continues into the winter, Bernstein said.

So far for September, airlines have planned European short-haul and long-haul flights at 96% and 75% of respective capacity. Though prices are up and passengers are spending on travel, winter demand remains uncertain, Bernstein added.

"With high input costs and risks to demand, it is increasingly likely that airlines will start adjusting capacity downwards, and some weaker ones may well fail altogether."

U.S. Markets:

Stock futures wobbled as investor attention returned to central bank policy, with a speech from Jerome Powell in the day ahead.

Investors are laser-focused on the Fed, which has moved to aggressively tighten financial conditions this year in a bid to get multi-decade high inflation under control, battering the stock market and raising the risk of recession.

"Today could put that narrative under pressure however," Deutsche Bank said. "There's a decent chance we'll see the largest ECB hike in their history, and we're also set to hear from Powell in his last appearance before the next [Fed monetary policy] meeting."

Forex:

A faster pace of interest rate rises by the ECB could slow down the euro's depreciation and have a cooling effect on inflation, but Swissquote Bank said at this point, "there is not much to do to stop the bleeding" in the currency.

It added that the euro will likely continue to lose ground, with European economies weakening, but the slower the currency's slide, the better for the economies.

Nordic Central Banks:

The Danish central bank is expected to follow the ECB's interest-rate rise 1:1 and to up its key policy rate to 0.65% as a base case, Danske Bank said.

An interest-rate increase in Denmark would mark the end to negative policy rates, Danske added. An announcement is due at 1500 GMT.

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Norwegian mainland GDP fell 0.3% on month in July while expectations were for a 0.2% increase, SEB said.

The underlying growth trajectory has been weak following the initial rebound after Covid-19 restrictions were lifted and the fall in July was primarily driven by sharply lower private consumption--a sign that high inflation, electricity prices and rising mortgage rates are starting to bite.

"Though growth has been weaker than projected by Norges Bank, it shouldn't alter the bank's plan of aggressive frontloading as long as the labor market stays tight, inflation expectations remain at uncomfortably high levels and inflation continues to accelerate."

Read: Norges Bank Likely to Continue Frontloading Despite GDP Miss

Bonds:

A 75 basis-point interest-rate rise by the ECB is likely to add to eurozone government bond yield spread widening, Citi said, especially as the central bank "is likely to offer little verbal support to the periphery ahead of the Italian election."

As the ECB went early in activating and announcing spread backstops, with flexibility in reinvestments from the PEPP and the announcement of the TPI, this leaves no scope for new policy bullets to stem the spread widening, Citi added.

Energy:

Oil futures held minor gains and SEB said a tight market and additional demand from gas-to-oil switching in European power plants, struggling to source natural gas supplies, are reasons to expect prices to stay elevated.

"The road ahead is paved with bullish supply events for oil," SEB said.

Read Barrons.com: Oil Prices Tick Higher After Putin Threatens to Let Europe 'Freeze'

Metals:

Gold and base metals gained in early trading ahead of the ECB's latest policy update, with a 75bp rate hike seen as likely.

In Asia, copper made modest gains, with optimism rising, as the base metal enters its peak demand season, Huatai Futures said.

Many refineries in China may halt production for maintenance this month, which could limit supplies and support prices. However, the upside may be limited by growing Covid-19 infections and tightening pandemic curbs in China, which could become a major swing factor in the coming months, Huatai Futures said.

DOW JONES NEWSPLUS


EMEA HEADLINES

ECB May Match the Fed's Three-Quarter Point Hike

The European Central Bank is signing up to giant interest-rate hikes like they're going out of fashion.

A little more than a month after the Federal Reserve delivered a second consecutive 0.75 point interest-rate increase, the ECB is set to step up the pace of its tightening to match.


Here's what analysts are saying ahead of the 'coin-toss' ECB interest-rate decision

As the European Central Bank readies its second rate hike in three months, there's genuine dilemma in financial markets whether the Frankfurt-based central bank will increase rates by a half-point or 75 basis points.

Inflation is raging, with consumer prices in the eurozone up 9.1% year-over-year in August. The euro EURUSD has weakened, falling below 99 cents. And Russia's decision to cut off gas supplies to Germany through the Nord Stream 1 pipeline has reduced the likelihood of inflation being brought under control any time soon. All that said, the economy is deteriorating, with the key PMI figures under the 50 line indicating a contraction in activity.


Associated British Foods Sees FY 2022 Adjusted Profit Rising on Sales Growth

Associated British Foods PLC said Thursday that its fiscal 2022 adjusted operating profit and adjusted earnings per share are expected to surpass the previous year's on strong sales growth, and that it anticipates rising sales, but declining profit, in fiscal 2023.

The U.K. conglomerate said fiscal 2022 group revenue is expected to be well above the 13.88 billion pounds ($16.01 billion) in the prior year.


Stora Enso Buys Dutch Packaging Producer in EUR1.02B Deal

Finnish pulp, paper and forestry product company Stora Enso Oyj said Thursday it has acquired Dutch corrugated packaging producer De Jong Packaging Group in a deal worth around 1.02 billion euros ($1.02 billion).

The acquisition will advance Stora Enso's strategic direction, accelerate revenue growth and build market share in renewable packaging in Europe while enhancing its offering in fresh produce, e-commerce and industrial packaging, it said.


Europe Considers Windfall Levies on Electricity Producers

BRUSSELS-European Union officials are weighing plans to redistribute some electricity producers' windfall revenues to households and companies reeling under the continent's high energy prices.

The European Commission, the bloc's executive arm, put forward on Wednesday a number of proposals to deal with high gas and electricity prices, including the windfall measure and a cap on the price of Russian natural gas, which the Kremlin has throttled in response to Western sanctions imposed after Russia invaded Ukraine.


U.K. Prime Minister to Announce Energy Bailout Funded by Borrowing

LONDON-Britain's new Prime Minister Liz Truss said her government would unveil a major bailout package to help households and companies survive a surge in energy prices triggered by the war in Ukraine, but she ruled out any new windfall taxes on energy companies.

During her first appearance as prime minister in the House of Commons on Wednesday, Ms. Truss promised her government would help British households and businesses struggling with high inflation and skyrocketing energy costs by capping their bills and cutting taxes, which she said would stimulate a sluggish economy. "The reality is this country will not be able to tax its way to growth," she told lawmakers.


Iran Expands Nuclear Program as Talks to Revive 2015 Deal Falter

Iran's stockpile of highly enriched uranium has grown enough to easily produce enough fuel for an atomic bomb, the United Nations atomic agency reported Wednesday, as talks to revive the 2015 nuclear deal falter over Tehran's last-minute demands for U.S. guarantees.

Iran's cache of highly enriched uranium of 60% purity increased by about 30% in the quarter to August 21, reaching 55.6 kilograms, according to the International Atomic Energy Agency's latest quarterly report sent to member states and seen by The Wall Street Journal. Its total stockpile of enriched uranium has grown to 3,941 kilograms, the report said.


Ukrainian Troops Advance in East as Kyiv Seizes the Initiative

An unexpected Ukrainian military offensive in the east near the country's second-largest city of Kharkiv is gaining ground, testing Russian occupation forces that also are under pressure in southern Ukraine, in the latest sign that Ukraine's defenders are seizing the military initiative.

Ukrainian units are advancing eastward from Kharkiv, according to Ukrainian officials and Russian war bloggers, targeting a critical Russian supply route.


GLOBAL NEWS

RBA Looks Set to Slow Pace of Rate Hikes But Peak is Unclear

SYDNEY-The Reserve Bank of Australia looks set to slow the pace at which it is raising interest rates, but says that it is unsure where the official cash rate will peak given global uncertainties and the significant task of reining in the biggest inflation problem in a generation.

(MORE TO FOLLOW) Dow Jones Newswires

09-08-22 0532ET