European stocks hover below five-week high ahead of ECB meeting

European shares fell in early trading on Thursday, as disappointing earnings soured the mood in global markets and traders were cautious ahead of an expected 75 basis point from the European Central Bank.

World stocks were knocked off a five-week high during the Wall Street session on Wednesday after U.S. heavyweights including Microsoft Corp (MSFT.O) and Alphabet inc (GOOGL.O) reported worse-than-expected earnings. But Asian markets benefited from speculation among investors that major central banks are considering slowing their aggressive interest hikes, given signs of an economic slowdown.

At 0757 GMT, the MSCI world equity index (.MIWD00000PUS), which tracks shares in 47 countries, was little changed, holding just below Wednesday's five-week high.

"Earnings have been better in Europe than they have in the U.S. mainly because of that mix of old economy, new economy," said Patrick Spencer, vice chairman of equities at Baird, referring to the dominance of technology companies in the United States compared to oil and materials companies in Europe. The euro slipped 0.2% against the dollar at $1.0063 ahead of the European Central Bank's policy announcement.

Eurozone government bond yields were up, with the benchmark German 10-year yield up 5 bps on the day at 2.167% .

Investors will be looking out for signs ECB President Christine Lagarde is softening her tone around future interest rate increases, Baird's Spencer said.

Growing speculation that major central banks will start to slow their rate hikes has put euro zone bonds on track for the biggest weekly rally in eight months, even though euro zone inflation remains close to 10%.

The Federal Reserve is expected to deliver a 75 bps hike in November, but speculation that it may be less aggressive afterwards has led the dollar to decline 1.8% so far this week.

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