MARKET WRAPS
Stocks:
European stocks lost ground on Thursday after the Federal Reserve signaled plans to keep raising interest rates, possibly in smaller increments but to higher levels than previously anticipated.
"Just as investors believed they'd secured the dovish pivot they so craved, Powell stepped up to deliver another crushing blow to the markets. Well, that's how it's been perceived initially but that could change once the dust settles," wrote Craig Erlam of OANDA.
Read the European reactions to the latest Fed move.
The Bank of England is expected to announce the biggest interest-rate increase in 33 years later Thursday as it tries to re-establish authority after weeks of political and financial market turmoil.
Economists expect a 0.75 percentage point hike from the Monetary Policy Committee, the biggest step up since 1989 and matching the pace of recent Fed moves. It would be the eighth consecutive increase since the BOE started tightening in December.
U.S. Markets:
Stock futures edged lower ahead of a busy day of economic data and earnings and following Wednesday's post-Fed selloff.
Economic updates include weekly initial jobless claims, foreign trade deficit data for September, third quarter productivity numbers, the ISM services index for October and September factory orders.
Corporate earnings include Moderna, Peloton and Under Armour before the opening bell, with Starbucks, PayPal and Warner Bros Discovery after the close.
Early Movers:
Qualcomm again slashed its forecast for smartphone shipments and gave a gloomier than expected sales outlook. Its shares fell 7.1% premarket.
eBay shares jumped 7.4% off hours after it reported better-than-expected earnings and gave an outlook for the holiday period in line with analysts' forecasts.
Roku said it expected revenue from advertising and sales of streaming hardware to fall in the fourth quarter, sending its shares down 18% in after-hours trading.
Etsy shares jumped 11% premarket after it reported that its revenue increased despite a decline in sales on its platform following a fee increase earlier this year.
Forex:
Sterling could fall further if the BOE raises interest rates by a larger, although widely anticipated, 75 basis points, but its policy guidance is more cautious than expected, MUFG Bank said.
"It is clear that pressure to keep raising rates at a quicker pace is already diminishing," MUFG said.
Additional fiscal tightening is expected while the BOE's updated projections may continue to show inflation falling well below its 2% target by the end of the forecast period.
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The dollar hit a two-week high against a basket of currencies and the euro after the Fed policy decision and ING said the currency should rise further particularly against riskier currencies.
"Expect Fed policy to prove a bullish undercurrent to the dollar and an even more inverted U.S. yield curve to weigh in particular on the high beta activity and commodity currencies, such as the Australian and New Zealand dollars, Norway's krone and Sweden's krona."
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The Norwegian krone fell after the Norges Bank raised its benchmark interest rate by 25 basis points to 2.5%, in line with broad expectations although less than some had expected, and suggested a more gradual approach to future decisions.
Market expectations were split between a 25bp rate rise and a larger 50bp move, Commerzbank said.
Norway's central bank said the policy rate has been raised markedly over a short period and is beginning to have a tightening effect on the economy, which may suggest a more gradual approach to policy.
EUR/NOK rose to a one-week high of 10.3677 after the decision from 10.2778 beforehand, according to FactSet.
Read: Norway Central Bank Lifts Rate to 2.50% From 2.25%; Sees Next Hike in December
Bonds:
Eurozone government bond yields were higher in early action, with Mizuho suggesting that Powell's update on peak rates probably implied a median terminal expectation of closer to 5%, rather than 4.5%, "roughly what was already priced" before the Fed meeting.
Energy:
Oil prices were down more than 1% in early European trade after Powell's signal that the ultimate level for rates would need to be higher for longer to bring down inflation, hit expectations for oil demand and boosted the dollar.
Other Insight:
Even with European gas stockpiles close to full, the continent is short of 270 terawatts an hour-worth of gas to get through the winter, assuming consumption levels are in line with historical averages, SEB said.
Cold weather could worsen the situation. A winter akin to the 2017-18 cold spell which hit Northern Europe would boost demand for gas and put the energy deficit at 390 TWh, SEB said.
Early fall weather in Europe so far has been mild, however. "Every warmer-than-normal day with reduced gas consumption and delayed start of inventory withdrawal, is easing the pain," SEB added.
Metals:
Base metals and gold fell sharply in Europe after the Fed indicated more interest-rate hikes would follow Wednesday's 75-basis-point increase, boosting the dollar.
SPI Asset Management said there was "little to get excited about deploying risk here as market participants remain focused on inflation prints, which will ultimately matter most regarding the Fed outlook."
DOW JONES NEWSPLUS
EMEA HEADLINES
Europe Seeks Exemption From U.S. Rules on EV Tax Breaks
BRUSSELS-U. S. and European Union environmental policies are on a collision course, prompting an urgent meeting to defuse rising tensions over clean-technology subsidies that threaten to upset a trade relationship that leaders had pledged to rebuild.
A new task force focused on clean-energy tax credits that were included in the U.S. Inflation Reduction Act will hold its first in a series of weekly meetings on Friday, an EU official said. The task force, which is being led by the U.S. National Security Council and the cabinet of European Commission President Ursula von der Leyen, is meant to address EU concerns that many European-made products won't qualify for the credits because of where they were made.
BNP Paribas Beat Expectations in 3Q After Riding Out Tough Investment Market
BNP Paribas SA said it beat expectations in its third quarter as its investment-banking division proved resilient amid strong client demand despite the market slump.
The French lender said Thursday that its net profit in the three months to the end of September rose to 2.76 billion euros ($2.71 billion) from EUR2.50 billion in the same period a year earlier.
Stellantis Backs Full-Year View After 3Q Revenue Rose
Stellantis NV on Thursday confirmed full-year targets after revenue increased on higher volumes and strong pricing in the third quarter.
The car maker reported revenue of 42.10 billion euros ($41.33 billion) for the three-month period, which compares with EUR32.55 billion the prior year.
BMW Backs Auto Margin Target for 2022 After 3Q Earnings Rose
BMW AG on Thursday confirmed the full-year margin target for its auto business and said earnings came in higher in the third quarter, helped in part by car pricing.
The German luxury car maker said quarterly aftertax profit rose to 3.18 billion euros ($3.12 billion) from EUR2.58 billion the same period a year earlier.
Sainsbury 1H Revenue Rose But Pretax Profit Fell Against Strong Comparative; Backs Guidance -- Update
J Sainsbury PLC on Thursday reported a fall in pretax profit for the first half of fiscal 2023 despite a rise in revenue, primarily due to one-off benefits in the same period a year prior, and backed its full-year guidance.
The British grocer posted a pretax profit of 376 million pounds ($428.3 million) for the six months ended Sept. 17 compared with a restated GBP527 million for the same period a year earlier. The company said this reflected higher exceptional income in the previous period from settling legal disputes, but noted profits remain significantly above prepandemic levels.
Rolls-Royce Says Recovery Continues; Backs 2022 Guidance
Rolls-Royce Holdings PLC said Thursday that its recovery continues after booking record order intake in its power systems division and backed its guidance for the year.
The U.K. engineering company said large engine flying hours were at 65% of the levels seen in 2019 in the four months to Oct. 31., and up 36% in the year to date. It said this 36% growth was a reflection of the uneven recovery around the world, with stronger recovery in the U.S. and Europe but lower travel in China and Asia due to the measures stemming from Covid-19.
Broken Deal Triggered Currency Losses for Barclays, Deutsche Bank and Citigroup
Barclays PLC, Deutsche Bank AG and Citigroup Inc. lost money on currency-hedging products they sold to a client for an acquisition that fell through, the latest example of the damage spread during the worst stretch for deal making in years.
Prosus NV, best known as the largest investor in Chinese internet giant Tencent Holdings Ltd., agreed in August 2021 to acquire India's BillDesk, an online payments platform, for 345 billion rupees, equivalent to about $4.7 billion at the time. To protect the price against swings in the rupee, Prosus bought derivative contracts from the banks that allowed it to lock in the exchange rate ahead of the deal's closure. Prosus had the flexibility to get rid of the hedge for no fee if the deal didn't close.
Glencore Faces Further Bribery Penalties in the U.K.
LONDON-British prosecutors are seeking over $200 million in penalties from Glencore PLC to resolve a probe into bribery in Africa, and they said they now want to prosecute a number of the commodities giant's former executives.
The U.K.'s Serious Fraud Office on Wednesday asked a court to impose the penalties, which it said could include Britain's largest corporate confiscation order to claw back money made from crime. A judge is set to decide on the size of the penalty Thursday.
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11-03-22 0632ET
