European stocks dropped as investors prepared for a rates decision by the European Central Bank after a quarter-point hike by the Federal Reserve. US regional lenders slumped on renewed worries about financial stability.
(Bloomberg) — European stocks dropped as investors prepared for a rates decision by the European Central Bank after a quarter-point hike by the Federal Reserve. US regional lenders slumped on renewed worries about financial stability.
Most industry groups were in the red in Europe, with energy the only bright spot after Shell Plc posted strong quarterly profit and maintained the pace of share buybacks. Contracts on the S&P 500 edged lower, with PacWest Bancorp leading a plunge in US regional lenders in premarket trading after saying it’s in talks with several potential investors.
Markets are kicking off the month with rate decisions from two major central banks amid lingering concerns about financial stability and price pressures. Today, the ECB is expected to slow the pace of rate increases after its preferred measure of inflation dipped for the first time in 10 months. US stocks erased a rally on Wednesday after Fed Chair Jerome Powell played down prospects of rate cuts.
Oil rose, recovering after a sudden dip early in the session on Thursday as Chinese traders returned after a break. Treasuries retreated, unwinding some of their gains after the Fed commentary.
“The ECB meeting is expected to be a more complex one compared to that of the Federal Reserve,” said Erick Muller, director of product and investment strategy at Muzinich & Co. “If no one doubts the ECB will raise rates again at this week meeting, the magnitude of the rise and the tone of the communication are difficult to forecast.”
PacWest slumped as much as 48% in premarket trading amid renewed fears about the health of the US banking system. The shares had plummeted in extended trading after Bloomberg News reported it was considering strategic options including a sale. Western Alliance Bancorp also tumbled, heading for a fifth straight decline.
“The tightening in credit conditions will put some significant downward pressure on the economy,” Michelle Girard, head of US for NatWest Markets, said on Bloomberg Television. “You will see the Fed in a position to move policy to a less restrictive stance sooner than what the Fed chairman today was suggesting.”
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Elsewhere, an Asia-wide gauge of equities rose, helped by gains in Hong Kong shares, while stocks in mainland China resumed trading after a three-day break.
Key events this week:
- US initial jobless claims, trade balance, Thursday
- European Central Bank rate decision, followed by ECB President Christine Lagarde’s news conference, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 6:37 a.m. New York time
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.7%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1054
- The British pound was little changed at $1.2565
- The Japanese yen was little changed at 134.62 per dollar
Cryptocurrencies
- Bitcoin rose 2.9% to $29,359.38
- Ether rose 2.3% to $1,916.36
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.37%
- Germany’s 10-year yield advanced one basis point to 2.26%
- Britain’s 10-year yield advanced two basis points to 3.72%
Commodities
- West Texas Intermediate crude rose 0.5% to $68.93 a barrel
- Gold futures rose 0.5% to $2,047 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Stephen Kirkland, Richard Henderson and Jiyeun Lee.
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