European shares opened lower and US futures were mixed on Thursday, hours before the European Central Bank was expected to raise interest rates in an attempt to dampen inflation.
The regional Stoxx Europe 600 index lost 0.2 per cent in early trading and is now down 15 per cent for the year. Germany’s Dax fell 0.4 per cent and London’s FTSE 100 added 0.4 per cent.
Despite growing economic problems in the eurozone, the ECB’s governing council is on Thursday expected to raise borrowing costs by 0.75 percentage points to 1.5 per cent — pushing the deposit rate to its highest level since January 2009. Inflation in the euro area hit 9.9 per cent in the year to September.
The Federal Reserve has raised US rates by 0.75 percentage points at its past three meetings, and is expected to do the same when it meets in early November.
Luca Paolini, chief strategist at Pictet Asset Management, said the ECB may be tempted to slow the pace of increases in December if the Fed follows a similar path, even though short-term inflationary pressures are greater in Europe than they are in the US.
“Falling natural gas prices give the ECB some justification for slowing the pace of tightening [later this year], and the bank would rather go big now to prove it’s serious about inflation,” said Paolini. “By December the main worry will not be inflation, but the decline in economic activity.”
The slowdown has already begun to weigh on earnings. Shares in Alphabet, Microsoft and Meta, three of the world’s most valuable companies, have plunged this week after each of the companies released weak quarterly results.
Futures contracts tracking Wall Street’s S&P 500 were up 0.3 per cent ahead of the New York open, while those tracking the tech-heavy Nasdaq 100 were flat.
Hong Kong’s Hang Seng added 0.7 per cent and Japan’s Topix was down 0.6 per cent. The CSI 300 index of Shanghai- and Shenzhen-listed equities fell 0.7 per cent.