European stocks steady with futures before ECB rate liftoff

Bloomberg

European stocks steadied with US equity futures on Thursday as investors braced for the European Central Bank’s first interest rate hike in 11 years, while Russia resumed sending gas to Europe through a key pipeline, dispelling investors’ worst fears.
The Stoxx Europe 600 Index and the euro recouped losses following the resignation of Italy’s Prime Minister Mario Draghi. Contracts on the S&P 500 and Nasdaq 100 were little changed. Treasury yields rose, pushing the 10-year benchmark above 3%.
Italy’s political turmoil ramps up the pressure on the ECB just before it unveils its new crisis management tool to shield the most vulnerable eurozone members from market speculation. The monetary policy decision will end an era of negative rates that helped the region’s economies navigate the global financial crisis, the sovereign debt meltdown and then the 2020 pandemic.
Risk sentiment remains fragile as investors debate whether equities have reached a trough after this year’s selloff amid the war in Ukraine, a slowdown in China and the prospect of a US recession. The resumption of gas exports to Europe through Nord Stream is set to provide some relief for the continent that’s racing to store the fuel before the winter.
Markets are also assessing earnings to gauge how companies are managing amid the highest inflation in generations and escalating borrowing costs.
Many stocks “are still in very distinct downtrends so you can see a rally off maybe an oversold level but really if you are not starting to recover and break into a better uptrend it really remains to be seen if this can continue,” said Cameron Dawson, NewEdge Wealth chief investment officer. “So it’s more a relief at this point and not necessarily a trend change.”
Geopolitics are adding to investors’ skittishness. Russian President Vladimir Putin has warned that unless a spat over sanctioned parts of the Nord Stream pipeline is resolved, flows will be tightly curbed, and some European countries are telling residents to conserve gas.
In the wake of Draghi’s resignation, the yield on Italy’s 10-year note jumped as much as 21 basis points to 3.6%, its highest since June. The spread over equivalent German bonds, a common gauge of risk, rose to 233 basis points.
Meanwhile, US President Joe Biden said he expects to speak to Chinese leader Xi Jinping “within the next 10 days” as Washington considers lifting some tariffs on the Chinese
imports.
Oil was back below $100 a barrel as growing stockpiles of crude and gasoline tempered fears of a tight market. Bitcoin dropped below $23,000.
Tesla Inc. disclosed that it sold about 75% of holdings of the cryptocurrency during the second quarter. Shares in the electric-vehicle maker rose after its second-quarter earnings beat Wall Street estimates.
The Stoxx Europe 600 rose 0.1% as of 11:04 am London time and futures on the S&P 500 were little changed.
While futures on the Nasdaq 100 were little changed, futures on the Dow Jones Industrial Average fell 0.2% and the MSCI Asia Pacific Index falls 0.1%. The MSCI Emerging
Markets Index rose 0.1%.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.0181.
While the Japanese yen fell 0.4% to 138.77 per dollar, the offshore yuan was little changed at 6.7798 per dollar. The British pound fell 0.2% to $1.1948.