Markets ignore ECB hawks... is it the Fed's fault?
MARKETS IGNORE ECB HAWKS… IS IT THE FED'S FAULT? (1010 GMT)
Money markets are pricing in a terminal point for the European Central Bank's key rate of around 3.65%, way below the peaks above 4% in early March, shrugging off the hawkish noises that continue to emerge from the ECB
"The barrage of hawkish ECB comments continues with Bloomberg quoting internal sources as saying a September hike cannot be excluded," ING analysts say in a research note.
"Unsurprisingly, this anonymous briefing failed to move market expectations, and rightly so."
Three 25 bps rate hikes in June, July and September would bring the ECB deposit facility rate to 4%.
December 2023 ECB euro short-term rate forwards EUESTECBF=ICAP rose to about 4% in early March, implying market expectations for a depo rate at 4.1%.
"There are four months' worth of data until (September's meeting), and two updates of the ECB's forecast, so what the hawkish wing of the Governing Council thinks in May of policy decisions in September is heavily discounted by the market," ING argue.
"The focus remains very much on U.S. inflation data, and markets assume a strong read-across to European policy rates," they say.
U.S. Treasury yields fell on Wednesday after consumer price data for April confirmed expectations that the Fed will leave rates unchanged in June.
Market participants said last month there was enough nervousness about the banking sector or a possible policy misstep to mean ECB hawks face an uphill battle convincing markets that policy rates might rise above 4%.
STOXX GAINS AS RESULTS DULL BROADER FEARS (0822 GMT)
The STOXX 600 .STOXX is 0.5% higher, getting a boost from a round of positive results as investors brush off fresh concerns about the pace of China's recovery as well as fears surrounding the U.S. debt ceiling.
The largest Dutch bank ING Groep INGA.AS, on Thursday said it would launch a new share buyback after it reported better than expected first-quarter earnings, helped by rising interest rates and modest risk costs.
Italian truckmaker Iveco IVG.MI on Thursday raised its earnings guidance for this year, and German conglomerate Thyssenkrupp TKAG.DE raised its cash flow guidance.
Personal and household goods .SXQP and retailers .SXRP are performing the best on a sector basis, both rising 1.3%.
Autos .SXAP are the worst off, down 0.4% and dragged lower by Volkswagen VOWG_p.DE, down 4.9%. Basic resources .SXPP are not far behind autos, down 0.25%.
Norwegian salmon farmer SalMar SALM.OL is toping the STOXX 600 .STOXX, up 8.1% after Q1 results, while shares in Danish healthcare company Coloplast COLOb.CO are at the bottom, down 6.6% after posting worse-than-expected Q2 adjusted EBIT and lowered EBIT margin guidance
US DEBT DRAMA CRASHES JAPAN'S G7 PARTY (0656 GMT)
U.S. Treasury Secretary Janet Yellen is highlighting three core priorities at the start of the G7 finance ministers' three-day meeting in Niigata, Japan today: reining in global inflation, bolstering long-term economic resilience, and redoubling a commitment to Ukraine.
But almost everyone also wants to hear from her that the United States can sort out its own debt ceiling conundrum and avoid a potentially disastrous default.
The Japanese setting is particularly appropriate, with the host nation being the world's biggest holder of U.S. debt.
The bipartisan standoff already delayed the start of Yellen's trip so that she could personally ring up U.S. business executives and appear on major TV shows to warn of the dangers of not lifting the $31.4 trillion borrowing cap by the "X" date, ostensibly on June 1.
With time very tight, President Joe Biden has signalled the chance of cancelling his trip to the Japanese city of Hiroshima for the following weekend's G7 summit if the issue is not resolved.
Debt ceiling uncertainty continues to cast a pall over markets, with most Asian equity benchmarks weak again on Thursday.
The United States isn't the only concern either. Chinese inflation data showed consumer prices almost flat-lining in April, while factory gate deflation deepened.
It adds to worries about flaccid domestic demand, which had already been exacerbated by a shock decline in imports in data earlier in the week, dashing hopes that China's COVID-19 reopening could invigorate global growth.
At least investors could take some comfort that the U.S. Federal Reserve is almost certainly through with interest rate hikes after continued easing of consumer inflation in the latest reading overnight. The next test of that hypothesis is producer price data later in the day.
Ten-year Treasury yields continued to tick lower in Tokyo, putting the U.S. dollar under pressure against the yen.
The Bank of Japan continued to send the same mixed signals, with minutes of last month's meeting showing policymakers agreeing that progress is being made toward its 2% inflation target, but also that stimulus needs to stay in place amid all the global macroeconomic uncertainty.
The Bank of England, of course, takes the spotlight in European hours, with expectations for a 12th consecutive rate hike buoying sterling to a one-year peak.
Key developments that could influence markets on Thursday:
G7 finance ministers meeting running May 11-13
BOE policy announcement at 1100 GMT
US PPI at 1230 GMT
EUROPEAN FUTURES RISE DESPITE BIDEN RECESSION WARNING (0647 GMT)
European futures are ticking up, as traders await the Bank of England's policy rate decision due later today while also digesting U.S. President Joe Biden's latest warning of recession if the country's $31.4 trillion debt ceiling is not raised soon.
Futures on the STOXX 50 STXEc1 are 0.2% higher. Asian stocks eased on growing deflationary pressures in China and a mixed bag of Japanese earning.
The standoff over the U.S. debt ceiling has overshadowed a meeting of Group of Seven (G7) finance leaders starting on Thursday. Meanwhile, markets are still digesting data on Wednesday that showed the slowest rise in annual U.S. consumer inflation in two years.
On the earnings side, Dutch bank ING Groep INGA.AS reported better than expected first-quarter profit on Thursday, helped by rising interest rates and modest risk costs. German conglomerate Thyssenkrupp TKAG.DE raised guidance for free cash flow on Thursday.
Traders expect BoE to raise borrowing costs for the 12th meeting in a row on Thursday.
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