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Following the ECB’s rates hike last week, European markets might move depending on reports from corporate earnings and a new US Fed policy.
After a few rollercoaster weeks mostly characterized by lower lows, European markets brace for the outcome of the two-day policy meeting from the Fed. This week will likely be a big week for the region’s markets as earnings and monetary policy take center stage.
In addition to prospective takeaways from the Fed’s policy, European markets also look to take cues from big-name financial reports this week. Expected reports include UBS, Unilever, LVMH, Credit Suisse, Deutsche Bank, Daimler, Shell, Barclays, Nestle and Renault, to name a few.
Furthermore, notable European corporate earnings due before the bell on Monday include Vodafone, Phillips, Faurecia, Ryanair and Julius Baer. Phillips shares took a massive hit, falling 11% by mid-morning on weak quarter and guidance figures. This decline represents a 9-year low for the Dutch multinational conglomerate as it missed Q2 earnings expectations by a big margin.
European markets began the week mixed as the Stoxx 600 was trading around the flatline by mid-morning. The popular pan-European stock index had fallen by more than 0.4% in the pre-trading session. Sitting atop the Stoxx 600 is French car parts supplier Faurecia, having climbed more than 72% on the back of strong first-half results. In addition, bank stocks also climbed 1.8%, while shares of travel and leisure companies declined 0.7%.
European Markets Eye Ongoing Fed Policy Deliberations Following ECB Rates Hike Last Week
In immediate focus is the Federal Reserve’s two-day policy meeting which concludes on Wednesday. Economists anticipate that the US apex bank will hike interest rates once more by 75 basis points. This development came on the heels of the European Central Bank’s 50-basis-points rate hike last week. The ECB’s decision to kick start its own hiking cycle by such a substantial margin was larger than previously suggested.
As it stands, the ECB will consider the eurozone economic landscape before deliberating on another substantial rate hike. Speaking at a media session on Austria’s central bank governor Robert Holzmann said of the ECB’s potential September hike:
“The economy will grow less strongly, the forecasts point in this direction, that has made us somewhat cautious. We will see in the autumn what the economic situation is. Then we can probably decide if we do another 0.5% or less.”
Furthermore, Holzmann also added that the European governing bank looks to avert the general public’s expectation that inflation will rise higher throughout the eurozone.
Asia-Pacific & United States
Amid the current European market development, Asia-Pacific-based shares were mostly lower overnight. This comes as concerns around a global economic downturn halt a recent reversion of risk-on sentiments for investors and traders. Currently, traditional safe haven bonds and the dollar are experiencing substantial bids in the Asia-Pacific region.
Meanwhile, stock futures were trading marginally lower in the US during the pre-market session. This follows a positive week in the US as traders look ahead to a deluge of notable companies’ quarterly earnings and Fed outlook.