Updated at 8:40 am EST
Wall Street futures edged lower Thursday, while the dollar gave back recent gains against its global peers, as investors eyed a key rate decision from the European Central and a policy speech from Fed Chairman Jerome Powell.
The ECB, in fact, delivered its biggest rate hike on record, lifting its key refinancing rate by 75 basis points to 1.5% while warning that “very high energy prices are reducing the purchasing power of people’s incomes” and will likely lead to a “substantial slowdown” in economic growth.
Stocks were hoping to build on yesterday’s solid rally on Wall Street, which snapped the longest daily losing streak for the Nasdaq since 2016, amid a pullback in the dollar and bets on a so-called ‘soft landing‘ for the U.S. economy.
Markets may get further clues on that direction from Chairman Powell’s speech later this morning in Washington, which begins just as ECB President Christine Lagarde will address the media in Frankfurt.
Powell will take part in a question-and-answer session moderated by Cato Institute CEO Peter Goettler at 9:10 am Eastern time as investors look for clues as to the size of the Fed’s anticipated rate hike on September 21 and the central bank’s policy path between now and the end of the year.
The CME Group’s FedWatch is pricing in an 82% chance of a 75 basis point rate hike, the third in succession, as investors look for a so-called ‘terminal’ Fed Funds rate that is north of 4% before Powell signals a paused in the monetary tightening.
The ECB, which is battling both a looming recession linked in part to Russia’s war on Ukraine and the region’s escalating energy crisis, as well as record high inflation, is also lifted its lending and deposit rates by 75 basis points as part of today’s decision.
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The hawkish tone anticipated from both, however, was marginally offset by comments from Reserve Bank of Australia Governor Philip Lowe, who argued “case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises” following a move earlier this week to boost the country’s key lending rate to a seven-year high of 3.25%
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.26% lower on the session at 109.537 while benchmark 2-year Treasury bond yields eased to 3.423%.
The softer dollar added upward pressure on oil prices, with the ongoing energy standoff between the European Union, which has proposed price caps for Russian oil exports, and Vladimir Putin providing further support.
WTI crude futures for October delivery were marked 67 cents higher on the session at $82.61 per barrel while Brent contacts for November, the global benchmark, added 45 cents to trade at $88.45 per barrel.
On Wall Street, futures contracts tied to the S&P 500 are indicating a modest 7.5 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 25 point decline. Futures linked to the tech-focused Nasdaq are indicating a 40 point decline.
In overseas markets, Europe’s Stoxx 600 benchmark gained 0.06% in mid-day Frankfurt trading after the ECB rate decision, while the region-wide MSCI ex-Japan index rode last night’s rally on Wall Street to gain 0.31% from yesterday’s seven-month lows.
Tesla (TSLA) shares were typically active, rising 0.3% after it notched a big jump in China sales and exports last month as the carmakers Shanghai gigafactory returned to full pace following shutdowns linked to Covid restrictions and a scheduled upgrade.
GameStop (GME) shares were up 6.5% after the video game retailer unveiled a new partnership with crypto exchange group FTX that offset a sixth consecutive quarterly loss.