LONDON – European stocks were cautious on Thursday morning as investors awaited the latest policy decision from the European Central Bank and followed developments in Ukraine.
The pan-European Stoxx 600 was up 0.2% in early trade, with travel and leisure stocks up 1% while telecoms fell 0.8%.
In terms of individual stock price movements, Hungary’s Wizz Air rose 6.8% after its trading statement after the close. Atlantia rose 5% after the Benetton family and US investment firm Blackstone submitted a bid for the Italian road and rail company.
At the bottom of the European blue-chip index, Swedish telecoms firm Ericsson fell 6% after warning it was likely to be fined by US regulators for its handling of a bribery investigation in Iraq. The company also reported a drop in quarterly earnings following its exit from Russia.
“The Eurozone faces the same inflationary challenges as the UK and US, with interest rates lagging far behind the accelerating rate of inflation but economies far from being able to cope with significant anti-inflationary rate hikes.”
Steve Clayton
Fund Manager, Hargreaves Lansdown
The ECB will announce its latest monetary policy decision at 12:45pm London time. Markets are not expecting a change in interest rates just yet, but generally expect the ECB Governing Council to adopt a more hawkish tone and lay the groundwork for monetary tightening over the summer as eurozone inflation looks set to hit record highs.
“The eurozone faces the same inflationary challenges as the UK and US, with interest rates lagging far behind accelerating inflation but economies far from absorbing significant anti-inflationary rate hikes,” said Steve Clayton, fund manager at British Asset Manager Hargreaves Lansdown.
Investors in Europe are also watching the war in Ukraine. A Russian missile cruiser was attacked and damaged by Ukrainian forces in the Black Sea early Thursday, forcing the entire crew to be evacuated.
US President Joe Biden on Wednesday announced more arms worth $800 million for Ukraine after an hour-long phone call with the country’s President Volodymyr Zelenskyy.
In other news, a sixth Covid-19 vaccine has been approved in the UK after the country’s public health agency gave the green light for vaccination by French company Valneva.
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Asia-Pacific stocks were higher for most of Thursday as investors reacted to announcements by central banks in South Korea and Singapore that they would tighten monetary policy.
In the US, stock futures were modestly higher in early premarket trading ahead of earnings reports from the largest US banks, including Wells Fargo, Goldman Sachs, Morgan Stanley and Citigroup.
JPMorgan Chase on Wednesday said its first-quarter profit fell sharply from a year earlier, due to increased bad debt costs and market turmoil from the Ukraine war.
Carolina Moura-Alves, head of asset allocation at Quintet Private Bank, told CNBC on Thursday that banks would not benefit as much from the upcoming cycle of interest rate hikes as they have in previous ones. In contrast, she suggested that technology stocks could offer an upside surprise.
“There are some challenges and the result that JPMorgan came out with yesterday, I’m really talking about late cycle dynamics that may not be as favorable for banks as previous walking cycles in history,” Moura-Alves said.
“Tech suffered from the yield curve repricing due to the higher discount rate as it is a longer duration sector compared to other sectors in the equity markets and we are now approaching a situation where the market is well in control like the Fed will go ahead, there has been a re-rating and maybe even an opportunity for some dovish surprises across the board.
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