UKX FTSE 100 Index

MARKET WRAPS

Watch For:

EU retail trade; Germany manufacturing orders, manufacturing turnover; UK construction PMI; trading updates from BMW, Diageo, Imperial Brands, Norwegian Air Shuttle

Opening Call:

Shares in Europe may see a steadier open Thursday, though volatility is set to persist. In Asia, major stock benchmarks were mixed; Treasury yields largely decline; the dollar weakened; while oil and gold prices rose.

Equities:

European stock futures point to gains at the open on Thursday, after Wednesday saw an end to the rally in global equities this week.

U.S. stocks closed lower after giving up late-session gains. Economic data released Wednesday showed signs of a strong economy, strengthening the belief that a Fed pivot is unlikely and fueling the market dip.

Kevin Flanagan, head of fixed-income strategy at WisdomTree, said the big question is whether the Fed wants to keep pedal to the metal with rates or let up a little bit with the potential hike in November. "We can kinda laugh about 50 basis points, 'Woohoo, they're really slowing down,' but it's still 50bps of a move."

Investors have been left with few places to hide from the year's volatility, especially as safe-haven assets have declined with the greater market.

"When it's raining outside you're gonna get wet," said Dave Grecsek, managing director in investment strategy and research at Aspiriant. "We're telling investors take a rain jacket and umbrella outside."

Read: Stocks won't find bottom until Fed nears end of rate-hike cycle

Economic Insight:

Fitch Ratings lowered its outlooks on the U.K. and the Bank of England to negative from stable, reflecting the "large and unfunded fiscal package announced as part of the new government's growth plan," which could "lead to a significant increase in fiscal deficits over the medium term."

"The change in fiscal trajectory will push general government debt to 109% of GDP by 2024 from an estimated 101% in 2022, reflecting both higher primary deficits and a weaker growth outlook."

Fitch sees average inflation increasing to 8.9% this year before gradually declining to 4% in 2024.

Forex:

The dollar weakened in Asia after gaining overnight on hawkish comments from Fed officials.

The greenback is following risk assets, said Ivan Asensio, head of forex risk advisory at Silicon Valley Bank.

Markets closed 3Q "with one of the worst Septembers we've had in a while, " which supported the dollar. Then "we opened the week with a tremendous rally in equities and risk assets and the dollar is following that move, " Asensio said.

Markets are in "bad news is good news" mode, he said. "If data is too good it allows the Fed to raise rates even more and will support the dollar."

--

The euro could stay weak against the dollar in the near term as the Fed maintains its tight policy stance and the eurozone energy crisis persists, Rabobank said.

Fed speakers have continued to signal further substantial rate rises so it's too soon to expect a significant dollar reversal, Rabobank said.

The European Central Bank is also focused on fighting inflation but the euro lacks the safe-haven credentials of the dollar so is more susceptible to concerns about slowing growth, Rabobank added.

Meanwhile, EUR is "not yet fully priced for the energy price crunch facing the region given the risk that it could extend for several years."

Bonds:

Treasury yields broadly declined after gains overnight on data showing U.S. private-sector job growth held steady in September, which reinforced the view that the Fed has scope to keep raising interest rates.

Markets are now pricing in a 65% probability that the Fed will raise interest rates by another 75 basis points to a range of 3.75% to 4% on Nov. 2. The central bank is mostly expected to take its fed-funds rate target to between 4.5% and 4.75%, or higher, by March, according to the CME FedWatch tool.

"While weak data earlier in the week fueled expectations that the Fed could consider a less hawkish stance, the market appears to have come to its senses. With inflation still over four times the Fed's 2% target and the jobs market still strong, any dovish pivot is likely still a long way off," said Fiona Cincotta, senior financial markets analyst at City Index.

Energy:

Oil futures advanced in Asia, buoyed by the agreement from OPEC and its Russia-linked allies to cut production by 2 million barrels a day.

Expectations of a cut of 1 million barrels a day were trounced with the much bigger move, said Chris Beauchamp, chief market analyst at IG.

Much now depends on whether global economic data improves from here to lay some recession fears to rest, Beauchamp added.

Read: Oil Production Cuts Are Less Than Expected. What That Means for Prices.

Metals:

Gold prices pushed higher early Thursday amid lower Treasury yields.

The precious metal looks set to consolidate between $1,680-$1,740/oz until both the U.S. nonfarm payrolls report and the latest U.S. inflation readings are released, said Oanda's Edward Moya.

Gold has to experience cooler prices and a sharper slowdown in the U.S. economy for a bullish breakout to form, he added.

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Copper prices rose in Asia, extending a broad recovery in recent days.

However, ANZ said the metal may face some difficulties maintaining its momentum following hawkish comments from U.S. central bankers, which may lead to further USD strength.

Further increases in warehouse inventories may also limit copper's upside, ANZ said.

TODAY'S TOP HEADLINES

Fed's Bostic wants to pause after December rate hike

The Federal Reserve should get its benchmark rate to between 4% and 4.5% by December and then pause, Atlanta Fed President Raphael Bostic said Wednesday.

"Ideally, I would like to reach a point where policy is moderately restrictive - between 4% and 4.5% by the end of this year - and then hold at that level and see how the economy and prices react," Bostic said in a speech at Northwestern University.

Top European Union Official Backs Calls for Gas Price Cap

BRUSSELS-European governments should consider temporary measures to curb prices in the continent's natural-gas market, European Commission President Ursula von der Leyen said, marking her clearest comments in support of a possible bloc-wide limit on gas prices.

Ms. von der Leyen's remarks, in a letter to European Union leaders on Wednesday, are part of an apparent shift by the commission, which until last week had seemed to sideline the option of a gas-price cap within the bloc. More than a dozen EU member states have called for a broad ceiling on gas prices, but such a move is opposed by Germany, the bloc's largest economy, and several others.

Fed's Daly says more rate hikes needed, dismisses 'pivot' talk

The Federal Reserve needs to keep raising its benchmark interest rate in order to cool inflation that hit a 40-year high earlier this year and has shown little signs of cooling, Mary Daly, president of the Federal Reserve Bank of San Francisco said Wednesday.

"I do see more rate increases as necessary," Daly said, in an interview on Bloomberg Television.

U.S. Believes Ukraine Was Behind Assassination of Putin Ally's Daughter

WASHINGTON-U.S. intelligence agencies have concluded that Ukraine was responsible for the August assassination outside Moscow of the daughter of a prominent far-right wing Russian ideologue, a U.S. official said.

The United States was not aware beforehand of the operation that killed Daria Dugina, the official said, and Washington has formally complained about it to Ukraine's government.

Elon Musk and Twitter at Odds Over Terms of Agreement to Close Deal

Representatives of Elon Musk and Twitter Inc. are still grappling with terms of an agreement that would enable his purchase of the social-media company to proceed, continuing a monthslong drama surrounding the fate of the blockbuster deal.

The discussions are the latest the two sides have held as a courtroom clash draws nearer. They quietly held unsuccessful talks about a possible cut to the price of $44 billion for the social-media platform before Mr. Musk reversed course Monday and said he would return to the original agreement's terms, people familiar with the matter said.

Former Uber Security Chief Found Guilty of Obstructing FTC Probe

A San Francisco jury has found Uber Technologies Inc.'s former chief security officer Joseph Sullivan guilty of criminal obstruction charges for failing to report a 2016 cyber intrusion to federal authorities.

The case was closely watched as a rare instance of a senior cybersecurity executive facing criminal consequences for a decision not to disclose a hacking incident.

Write to hoishan.chan@dowjones.com

Expected Major Events for Thursday

04:30/NED: Sep CPI

06:00/ROM: Aug Retail trade

06:00/GER: Aug Manufacturing orders

06:00/GER: Aug Manufacturing turnover

06:00/SWE: Aug New orders & deliveries in industry

06:00/SWE: Aug Industrial Production Index

06:00/FIN: Aug Foreign trade

07:00/HUN: Aug Retail Sales

07:00/SVK: Aug Internal trade, incl Wholesale & Retail

07:00/HUN: Aug Preliminary Industrial Production

07:00/SPN: Aug Industrial Production

07:00/AUT: Sep Wholesale Price Index

07:00/CZE: Aug Retail trade

08:30/UK: Sep S&P Global / CIPS UK Construction PMI

09:00/EU: Aug Retail trade

09:00/CYP: Sep CPI

23:01/UK: Sep BRC-Sensormatic IQ Footfall Monitor

All times in GMT. Powered by Onclusive and Dow Jones.

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(END) Dow Jones Newswires

October 06, 2022 00:15 ET (04:15 GMT)

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