Europe stocks close lower after central bank hikes
European stocks ended the day lower after central banks in Switzerland and the UK announced interest rate hikes.
The Stoxx 600 closed down 1.8% with all sectors in the red except banks and basic resources, which were flat.
The British pound fell to a fresh 37-low against the dollar, hitting $1.125 at 5 pm London, as the Bank of England said the country was likely already in a recession.
US stocks open mixed
US stocks opened mixed Thursday following the Federal Reserve’s decision Wednesday to implement its third consecutive 0.75% interest rate hike.
The Dow Jones Industrial Average and the S&P 500 hovered around the flatline in early deals, while the Nasdaq was down 0.2%.
— Karen Gilchrist
Bank of England raises rates by 50 basis points, in seventh consecutive hike
The Bank of England voted to raise interest rates by 50 basis points, lower than the 75 basis point rise expected by some analysts.
The bank said there had been further signs since August of “continuing strength in domestically generated inflation” but the recent announcement of caps on household and business energy bills would lower consumer price index rises going forward.
The pound was up slightly on the day around the $1.13 mark.
UK regulator to probe cloud market
The UK’s media regulator, Ofcom, on Thursday said it will begin an investigation into the dominance of Amazon, Microsoft and Google in the £15 billion public cloud infrastructure market.
Read more here.
The probe will focus on so-called “hyperscalers” like Amazon Web Services and Microsoft Azure, which let businesses access computing power and data storage from remote servers. Collectively, Amazon, Microsoft and Google generate around 81% of revenue in the market, according to Ofcom.
A final report will be published within 12 months detailing any concerns and proposed recommendations, the regulator said, adding that further action could be taken if it finds competition and innovation are being limited in any way.
Over the next year, Ofcom plans to launch additional probes into other digital markets, including personal messaging and virtual assistants.
Bank stocks outperforming other sectors, but gains are marginal
Bank stocks were Europe’s best performers at noon, with the sector up 1.3% since yesterday.
Soaring inflation is prompting the region’s central banks to increase interest rates, bringing in additional profits for the region’s banks.
Pan-European bank Unicredit leads the way with a 6.4% jump in shares after Chief Executive Andrea Orcel announced the bank would raise its guidance for the year during third-quarter results in October.
Spanish banking group Banco Sabadell’s shares are up 5.2% as the organization has entered talks with Worldline, Nexi and Fiserv for a possible payments deal.
Shares of Deutsche Bank followed the trend with a 4.9% increase, after CFO James bon Moltke said the bank would approach 2023 “with caution” at a financial conference.
Finecobank, Commerzbank, Banco BPM Group, Societe Generale and Caixabank are all up by at least 3%.
Swiss franc weakens dramatically against dollar, euro and sterling after rate hike
The Swiss franc weakened dramatically against the US dollar, euro and sterling following the central bank’s decision to hike interest rates by 75 basis points to 0.5%.
At 9:30 am London time, the dollar was 0.9% higher against the Swiss currency, while the euro and sterling were both around 1.4% higher against the franc.
Earlier this week, the Swiss franc hit its strongest level against the euro since Jan. 2015, as economists started to speculate about the prospect of a 75 basis points increase.
Norway’s central bank hikes benchmark interest rate to 2.25%
Norway’s central bank raised its interest rate to 2.25% from 1.75% and indicated it plans to hike rates later this year.
There are “clear signs of a cooling economy”, the Norges Bank said in a statement, and “easing pressures in the economy will contribute to curbing inflation further out.”
Based on the monetary policy committee’s current assessment, the policy rate will most likely be raised further in November, according to the bank.
Swiss National Bank raises its benchmark interest rate to 0.5%
The Swiss National Bank raised its benchmark interest rate to 0.5%, a shift that brings an end to an era of negative rates in Europe.
The 75 basis point hike follows an increase to -0.25% on June 16, which was the first rate rise in 15 years. Prior to this, the Swiss central bank had held rates steady at -0.75% since 2015.
Inflation in Switzerland is currently running at its highest rate in three decades, reaching 3.5% last month.
Italy heads to the polls on Sunday, here’s what to expect
Italy’s voters head to the polls on Sunday in a snap general election that is likely to see a government led by a far-right party come to power.
If that comes to pass, it will mark a massive political shift for a country already dealing with ongoing economic and political instability.
Polls prior to Sept. 9 (when a blackout period began) showed a right-wing coalition easily winning a majority of the seats in the slimmed-down lower and upper houses of parliament.
Atmosphere during Giorgia Meloni’s rally in Cagliari to launch her campaign for Italy’s next general election at Cagliari on September 02, 2022 in Cagliari, Italy. Italians head to the polls for general elections on September 25, 2022.
Emanuele Perrone | Getty Images News | Getty Images
The coalition is led by Giorgia Meloni’s far-right Fratelli d’Italia (Brothers of Italy), and includes three other right-leaning parties: Lega, under Matteo Salvini, Silvio Berlusconi’s Forza Italia and a more minor coalition partner, Noi Moderati.
The Brothers of Italy party stands out from the crowd and is expected to gain the largest share of the vote for a single party. It’s seen getting almost 25% of the vote, according to poll aggregator Politiche 2022, far ahead of its nearest right-wing ally Lega, which is expected to get around 12% of the vote.
Read more on the forthcoming election here
Market open: Fortum up 4%, Accor down 6%
Shares of Fortum rose again in early trade Thursday after the Finnish company agreed to sell its 56% stake in German utility Uniper to the German government. The state-owned energy company shifted its stake in a nationalization deal.
French hospitality company Accor saw its shares fall 6.3% at market open after JP Morgan cut its rating on the stock from neutral to underweight. The investment bank expressed concerns the group would not be able to return to its previous level of profitability, saying “our concerns have now exceeded the reasons we like it.”
Credit Suisse plans to split its investment bank into three: The FT
Credit Suisse has plans to split its investment bank into three, according to the Financial Times.
The Swiss lender wants to have a separate “bad bank” exclusively for risky assets as it recovers from several years’ worth of scandals and blunders.
New proposals suggest Credit Suisse will sell some of its profitable units as part of the radical reshuffle, with full plans expected to be announced at the bank’s third-quarter results on Oct. 27, the FT reported.
Oil prices climb after Fed’s rate hikes, demand fears linger
Oil prices climbed following the Fed’s third consecutive rate hike.
Reuters also reported Chinese refiners are expecting the nation to release up to 15 million tonnes worth of oil products export quotas for the rest of the year, citing people with knowledge of the matter.
Brent crude futures rose 0.45% to stand at $90.24 per barrel, while US West Texas Intermediate also gained 0.45% to $83.3 per barrel.
— Lee Ying Shan
Fed hike likely to keep Asian risk assets under pressure, JPMorgan says
Asian risk assets, especially export-oriented companies, will remain under pressure in the short term following the Fed’s rate hike, according to Tai Hui, chief APAC market strategist at JPMorgan Asset Management.
Tai added that a strong US dollar is likely to persist, but tightening monetary policy in most Asian central banks — with the exception of China and Japan — should help limit the extent of Asian currency depreciation.
The US dollar index, which tracks the greenback against a basket of its peers, strengthened sharply and last stood at 111.697.
CNBC Pro: This fund manager is beating the market. Here’s what he’s betting against
Stock markets are down but the fund managed by Patrick Armstrong at Plurimi Wealth is continuing to deliver positive returns. The fund manager has a number of short positions to play the market volatility.
Pro subscribers can read more here.
— Zavier Ong
CNBC Pro: Morgan Stanley’s Mike Wilson names the key attribute he likes in stocks
Morgan Stanley’s Mike Wilson is staying defensive amid the persistent market volatility this year. He names the key attribute he’s looking for in stocks.
Stocks with this attribute have been “rewarded” this year, with the trend likely to persist until the market turns more bullish, according to Wilson.
Pro subscribers can read more here.
— Zavier Ong
European markets: Here are the opening calls
European stocks are expected to open in negative territory on Wednesday as investors react to the latest US inflation data.
The UK’s FTSE index is expected to open 47 points lower at 7,341, Germany’s DAX 86 points lower at 13,106, France’s CAC 40 down 28 points and Italy’s FTSE MIB 132 points lower at 22,010, according to data from IG.
Global markets have pulled back following a higher-than-expected US consumer price index report for August which showed prices rose by 0.1% for the month and 8.3% annually in August, the Bureau of Labor Statistics reported Tuesday, defying economist expectations that headline inflation would fall 0.1% month-on-month.
Core CPI, which excludes volatile food and energy costs, climbed 0.6% from July and 6.3% from August 2021.
UK inflation figures for August are due and euro zone industrial production for July will be published.