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European Shares Seen Up In Cautious Trade

stockmarkets aug17 18nov22 lt

European stocks are seen opening higher on Friday, though underlying sentiment may remain somewhat cautious on growing concerns of a recession.

The slope of the U.S. yield curve is flashing brighter recession risks following more hawkish talk from Federal Reserve officials that rates are not high enough to tame inflation.

Markets have converged on a 50-basis point rate hike at the Fed's December 13-14 policy meeting, but fresh Fed remarks now point to a 5 percent or terminal rate in 2023.

Closer home, media reports suggest that European Central Bank policy makers may slow down the pace of interest-rate hikes, with a smaller 50 basis-point hike expected next month.

Asian markets traded mixed as signs of rising coronavirus cases in China and liquidity strains in its bond market added to economic uncertainty.

Investors shrugged off news that North Korea has launched an intercontinental ballistic missile that likely landed in Japan.

The dollar index slipped even as Treasury yields held gains across the curve, as investors reassess the prospect of higher interest rates.

Gold edged up slightly but was on track for a weekly fall on hawkish Fed comments. Oil edged up from a three-week closing low hit overnight.

The European economic calendar remains light, with ECB President Christine Lagarde scheduled to give a keynote speech later in the day.

Across the Atlantic, trading may be impacted by reaction to reports on existing home sales and leading economic indicators.

U.S. stocks saw wild swings before closing lower overnight while Treasury yields climbed on the back of mixed economic data and hawkish comments from St. Louis Federal Reserve President James Bullard.

Bullard said that previous interest-rate hikes have had limited effect on inflation, and that there is room for the Fed to raise interest rates by at least another full percentage point to 5 percent and 5.25 percent, above the level currently priced in by financial markets.

The Dow ended flat with a negative bias, the tech-heavy Nasdaq Composite shed 0.4 percent and the S&P 500 eased 0.3 percent.

European stocks ended mixed on Thursday, as Britain unveiled an austerity budget and data showed Eurozone inflation increased year on year to a record high of 10.7 in October.

The pan European Stoxx 600 declined 0.4 percent. The German DAX inched up 0.2 percent, while France's CAC 40 index slipped half a percent and the U.K.'s FTSE 100 finished marginally lower.

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