Investors are bracing for an ECB rate hike on Thursday. Markets expect the European Central Bank to raise rates by 25 basis points, which could weigh on growth and corporate earnings. Investors are also awaiting guidance on whether further hikes will follow.
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ING said in an analysis on Thursday morning that: “We expect the ECB to hike by 25 basis points from 2.0% to 2.25%, supported by a hawkish tone, but the bar has risen to surprise markets. Despite oil prices testing new lows earlier this week, the EUR curve is increasingly set on three rate hikes.”
Stock markets across Europe opened in positive territory despite the drop in Asian shares following another sell-off in AI-related stocks on Wall Street on Wednesday.
The Euro Stoxx 50 opened 1.2% higher but the broader pan-European Stoxx 600 rose was flat in early trading.
Germany’s Dax and France’s CAC 40 were both up by 1%, while the UK’s FTSE 100 led with a 1.2% gain. Meanwhile, Italy’s FTSE MIB rose by 0.7%.
In other dealings, Asian shares mostly fell on Thursday after another sell-off in artificial intelligence stocks weighed on Wall Street, while oil prices rose.
Japan’s Nikkei 225 lost 0.5%, South Korea’s Kospi fell 0.2%, and Australia’s S&P/ASX 200 slipped 0.2%. Taiwan’s Taiex declined 0.4%.
Hong Kong’s Hang Seng index edged 0.2% higher, while Shanghai’s Composite index dropped 0.2%.
On Wall Street, on Wednesday, the S&P 500 fell 1.6%, marking its first consecutive decline in three weeks. The Dow Jones Industrial Average dropped 1.9%, while the Nasdaq Composite lost 2%.
Wall Street has been unsettled since last week, when AI stocks reversed course after hitting record highs. Investors are weighing whether the recent pullback has eased concerns over excessive optimism or signals the beginning of a more prolonged downturn.
Super Micro Computer, which sells AI servers, plunged 28% after announcing late on Tuesday plans to raise $7 billion through sales of common stock and convertible preferred shares. Companies often seek to raise capital when share prices are elevated, though such moves can dilute existing shareholders’ stakes.
Micron Technology swung between gains and losses before ending down 4.7%. The stock has experienced sharp volatility in recent sessions, having fallen 7.7% last Thursday, dropped a further 13.3% on Friday and then rallied 9.9% on Monday. Despite the swings, its shares remain up 212.5% so far this year.
Nvidia, the chipmaker that has grown into a nearly $4.9 trillion company on the back of the AI boom, was the biggest drag on the S&P 500 after falling 3.7%. Broadcom, another major AI beneficiary, lost 5.1%.
Some pressure on AI-related shares may also be linked to investors raising cash ahead of several high-profile stock market debuts in the United States. SpaceX’s initial public offering could take place later this week.
Weakening stocks for companies with big fuel bills also pulled the market lower. United Airlines sank 6.2%, and cruise operator Carnival fell 6.3% after oil prices rose due to the latest fighting in the war with Iran.
Oil prices and US inflation
Brent crude rose 1.8% to $93.10 a barrel on Wednesday after President Donald Trump warned that Iran would “pay the price” for stalled negotiations between the two sides over the conflict. The war has effectively closed the Strait of Hormuz to oil tankers, disrupting crude shipments from the Persian Gulf to customers worldwide.
Higher oil prices have added to inflationary pressures. A report released on Wednesday showed US consumer prices rose in May at the fastest annual pace in three years.
Traders are increasingly betting that the Federal Reserve will need to raise its benchmark interest rate at least once this year in response to persistent inflation and a resilient labour market.
Higher yields can slow economic growth and weigh on a range of investments, including stocks and cryptocurrencies. They tend to hit the most highly valued assets hardest, and some critics argue that enthusiasm around AI has inflated a market bubble.
In early European trading, Brent crude was up by 0.5% at $93.60 a barrel, while US benchmark crude gained 0.7% to $90.70.
The US dollar traded at 160.58 Japanese yen in the morning. The euro rose slightly to $1.1542, and the UK pound cost $1.3377.
The gold prices dipped by 0.6% to $4,109.60 an ounce.