LONDON, (Reuters) – World share markets shuffled sideways on Thursday as investors looked ahead to a clutch of key central bank meetings, saw Chinese property teeter again and disappointing earnings from Netflix and Tesla that pushed Wall Street futures lower.
There had been pockets of gains (.HSMPI) in Asia and in commodities markets after China’s government pledged some additional support for its economy, although there was another slide in its tech stocks (.CSIINT) along with the festering property concerns.
Europe’s big bourses eventually nudged higher as a jump in metals prices, and a 2.3% leap in wheat after Russia struck Ukraine’s ports, lifted mining and basic resource stocks (.SXPP) more than 2%.
The major FX pairs were largely quiet (.DXY) but there was action in emerging markets.
China’s yuan shot up after authorities tweaked cross-border financing rules and major state-owned banks were seen selling dollars, while Turkey’s lira was stuck near a record low as its second interest rate hike since President Tayyip Erdogan secured a third decade in power in May underclubbed expectations.
“The need to tighten monetary policy to tame inflation and start to restore confidence in Turkish assets is recognised,” said Stuart Cole, chief macro economist, at Equiti Capital.
“But there are genuine concerns that if they go too fast they may potentially risk financial stability and shock the economy in general.”
The crucial next moves from the major economy central bank meetings in Japan, Europe and the United States are all a focus of investor attention, with the Bank of England then due in the first week of August.
Bank of Japan Governor Kazuo Ueda said this week there was still some distance to sustainably and stably achieving the central bank’s 2% inflation target, dousing speculation of a change to its “yield curve control” policy next week.
Traders and analysts expect the European Central Bank to raise its benchmark rate by 25 basis points next week, but what comes after that has been up for debate in the wake of a recent dovish tone taken by the central bank’s policymakers.
Markets seem a lot more certain of the Federal Reserve’s next steps, with traders expecting a 25 basis point hike but no more after that.
FRAGILE CHINA
China stocks have been under pressure in recent weeks as soft economic data weighed on sentiment, with investors waiting for meaningful stimulus to jump-start the country’s stuttering post-pandemic recovery.
Daleep Singh, chief global economist at PGIM Fixed Income, said China’s current recovery is unlike others as it relies on consumer-led growth following years of credit fuelled investment in property and infrastructure.
“However, the consumer already appears to be losing momentum. Moreover, there is no evidence as of yet that the property slump is bottoming out… We anticipate that fiscal stimulus will focus on local governments.”
Analysts at TD Securities meanwhile expect Beijing to announce a 4 trillion yuan ($560 billion) stimulus package at July’s Politburo meeting.
Asia’s tech stocks were not helped by Taiwan’s TSMC (2330.TW) – the world’s biggest chipmaker – posting a 23.3% fall in second-quarter net profit.
U.S. futures were pointing down , after Netflix’s (NFLX.O) second-quarter revenue numbers fell short of estimates and electric carmaker Tesla’s (TSLA.O) gross margin also failed to excite.
The Australian dollar rose 0.8% to $0.68 after strong domestic jobs data.
Bond markets were largely quiet following a strong rally on the back of better-looking inflation data from the United States and Britain over the last couple of weeks.
Commodities traders meanwhile watched wheat futures spike 2.3% on growing expectations that an attack on Ukrainian ports after Russia’s withdrawal from a Black Sea export deal will have a longer-term impact on global supply.
Evghenia Sleptsova, senior economist at Oxford Economics, said that between August and May, when the deal was working relatively well, Ukraine exported on average 4.5-5mt of grains per month via ports, versus 5-6mt per month before the war.
Between March and June 2022 at the peak of Russia’s post-invasion sea blockade, that number had been just 0.2-1mt per month though, meaning there could be another a big fall now.
“River port capacity has now increased somewhat, but we can safely assume that about 3mt per month of Ukraine’s grain exports would be lost,” she added, if the deal was not revived.
