World Share Markets Pause Ahead of Central Bank Meetings; Netflix and Tesla Earnings Disappoint
WHAT YOU SHOULD KNOW
- World share markets are treading cautiously in anticipation of key central bank meetings scheduled for the next week.
- Despite China’s government pledging additional support for its economy, the country’s tech stocks continue to face challenges due to soft economic data and a reliance on consumer-led growth post-pandemic.
- Earnings disappointments from major companies like Netflix and Tesla have led to lower Wall Street futures, adding to the cautious sentiment in global markets.
On Thursday, global stock markets showed little movement as investors awaited upcoming central bank meetings and reacted to disappointing earnings reports from Netflix and Tesla, which led to lower Wall Street futures. While there were some gains in Asian and commodities markets after China pledged additional support for its economy, tech stocks in China remained under pressure. In Europe, major stock exchanges eventually saw slight gains, driven by higher metals prices and a 2.3% surge in wheat prices due to Russia’s actions in Ukraine. Meanwhile, currencies of emerging markets experienced volatility, with China’s yuan rising after authorities made changes to cross-border financing rules, and Turkey’s lira hitting a record low ahead of an expected interest rate hike.
The focus of investors is now on the upcoming central bank meetings in major economies, including Japan, Europe, the United States, and the Bank of England. Bank of Japan Governor Kazuo Ueda recently indicated that there is still some distance to achieving the central bank’s 2% inflation target, dampening speculation about changes to its “yield curve control” policy. While the European Central Bank is expected to raise its benchmark rate by 25 basis points, uncertainty remains about its future steps given the dovish tone taken by policymakers. In contrast, the Federal Reserve’s next moves seem more predictable, with traders expecting a 25 basis point hike and no further increases.
China’s stock market has been facing pressure amid soft economic data, and investors are eager for meaningful stimulus to revive the post-pandemic recovery. The country’s current recovery relies on consumer-led growth following years of investment in property and infrastructure. However, signs of consumer momentum waning and the lack of evidence of a property market bottoming out have raised concerns. Analysts expect Beijing to announce a 4 trillion yuan ($560 billion) stimulus package at the July Politburo meeting. Additionally, the outlook for global supply has led to a spike in wheat futures as an attack on Ukrainian ports after Russia’s withdrawal from a Black Sea export deal raises concerns about potential disruptions.
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