Marketmind: Sinking feeling

A look at the day ahead in European and global markets from Anshuman Daga

The showman that he is, Tesla (NASDAQ:)’s Elon Musk entered Twitter’s HQ on Wednesday carrying a sink, hours ahead of an end-of-week deadline to complete his $44 billion purchase of the social media giant.

But financial markets may do well to be wary of how far the spillover from a surprisingly small 50 basis points hike at the Bank of Canada sinks in.

The Fed remains the pace-setter for world rates, and the transmission from rates to the real economy is fuzzier in the United States than it is for Canada – or Australia for that matter. And markets remain priced for a 75 basis point Fed hike next week.

The European Central Bank is also almost certain to deliver its second supersized 75 basis-point rate hike and hint that the job is not yet over – though the size of subsequent moves is debatable.

The ECB joined the global rate hike party late. And with euro area inflation at nearly 10% versus its 2% target, there’s little let-up in sight for the ECB despite rising recession risks.

The ECB decision is due at 1215 GMT followed by a news conference at 1245 GMT.

Markets are nevertheless building up optimism that the Fed and other central banks may start slowing the pace of rate hikes.

Hopes and hopeful dip buyers in Hong Kong pushed Asia’s benchmark ex-Japan stocks gauge 1.3% higher and the mighty dollar is making a rare retreat.

The across-the-board gains in markets came despite U.S. stocks ending lower after a patch of disappointing earnings reports.

And in after-hours trading, shares of Facebook (NASDAQ:) parent Meta Platforms Inc plunged nearly 20% after the company forecast a weak holiday quarter and significantly more costs next year.

Thursday’s advance estimate of third-quarter U.S. GDP will further set the tone for expectations of future interest rate hikes by the Fed.

For European stock investors, the focus will be on Credit Suisse Group’s major strategic overhaul that is set to be unveiled on Thursday after the embattled Swiss bank’s string of losses and risk management failures.

Credit Suisse goes off piste

Key developments that could influence markets on Thursday:

(ECB rate decision and meeting

(ECB set for another supersized rate hike

European economic data: Germany Oct CPI, Germany GfK Nov consumer sentiment

U.S. economic data: Sept durable goods, Advance GDP (Q3)

U.S. earnings: Apple (NASDAQ:), Amazon (NASDAQ:), Intel (NASDAQ:) and Mastercard (NYSE:)

European earnings: Credit Suisse, Unilever (NYSE:), STMicroelectronics and Shell (LON:)

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