- STOXX 600 up 1%
- Most sectors in the black, tech recovers
- Royal Mail hit by downgrade
- U.S. stock futures rise
European shares are off to a positive start this morning with the STOXX 600 .STOXX up around 1% in a broad-based bounce that sees 86% of its constituents in the black.
It looks immediate worries over mounting inflationary pressures and interest rate hikes have eased somewhat, pushing investors back into stocks and helping bond markets stabilise.
All sectors, expect oil and gas which yesterday escaped the sell-off, were positing gains with healthcare and industrials leading the way, up 1.4%. Tech was up 1.2%.
Royal Mail was the biggest faller, down 5%, hurt by a downgrade to sell from UBS. Heavyweights like food giant Nestle, drugmaker AstraZeneca and luxury group LVMH were in demand.
WHEN IT RAINS, IT POURS
From one crisis to another — a looming U.S. government shutdown is adding to markets’ unease, coming as it does amid a hawkish shift by major central banks and signs of strain in China from a power crunch and the problems at property developer Evergrande.
For a second day in a row, U.S. Senate Republicans blocked a bid by President Joe Biden’s Democrats to head off a potentially crippling U.S. credit default .
With federal government funding expiring on Thursday and borrowing authority running out around Oct. 18, the Democrats are trying to head off twin fiscal disasters while also trying to advance Biden’s ambitious legislative agenda.
A shutdown could result in furloughs for hundreds of thousands of federal workers in the middle of a public health crisis.
For markets, the timing couldn’t be worse.
Cash-strapped China Evergrande Group is scrambling to sell some of its assets ahead of the expiry of another deadline to make a bond coupon payment to offshore investors. Several regions of the world’s No. 2 economy are also paralysed by electricity shortages.
Meanwhile a surge in bond yields has unnerved markets globally. Ten-year U.S. yields are up 20 basis points so far this month, their biggest gain since March.
This morning though, Treasury and European bond markets are on more stable ground while European and U.S. stock futures are higher. And sterling, which has taken a beating on fears that fuel crisis will hurt growth, too is recovering.
Markets will be listening carefully to heavyweight policymakers when they speak at a European Central Bank forum later on Wednesday – the ECB’s Christine Lagarde, the Bank of England’s Andrew Bailey and Fed chief Jerome Powell are all on the agenda for 1545 GMT.
Key developments that should provide more direction to markets on Wednesday: -Oil falls for second day as supply-driven rally peters out – Soft-spoken consensus builder Kishida to become Japan’s next PM – Japan may kick off process to sell $8.5 bln shares in Japan Post- Bloomberg – JPMorgan’s Dimon cautions a U.S. default would be ‘potentially catastrophic’ – Emerging markets: Thailand central bank – Euro zone inflation expectations, consumer sentiment – Europe earnings: Next
EUROPE EYES TENTATIVE BOUNCE
After the storm comes the sun and after suffering their second worst day of 2021, European shares may try to bounce back today and recover part of the lost ground.
The futures market is pointing to gains of as much as 0.5% following yesterday’s sell-off which caused a 2.2% drop in the STOXX 600 index amid fears about rising yields and inflation.
Over in Asia, shares headed south, weighed down by worries about economic growth in China and fears of a global slowdown, tracking losses on Wall Street where all the three major indexes slid nearly 2% or more.
On the corporate front eyes remain squarely on tech, the biggest stock market victim yesterday of rising yields.