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Marketmind: ECB to follow Fed hike, Meta surges

[July 27, 2023] A look at the day ahead in U.S. and global markets from Mike Dolan

With markets still betting Wednesday's interest rate hike from the Federal Reserve was the last in the cycle, the European Central Bank is due to follow suit today - while Meta provided one of bright spots of a packed corporate earnings diary.

Fed Chair Jerome Powell remained equivocal about whether there was one more policy rate rise left this year and said Fed staff were no longer forecasting a recession - but futures markets continue to see a less than 50% chance of another move.

Treasury yields and the dollar eased overnight.

The Commerce Department's snapshot of gross domestic product due on Thursday is expected to show the U.S. economy grew at a trend rate of 1.8% in second-quarter, almost a full point drop in core inflation to 4% and the housing slump nearing an end.

The stock market remains buoyed near highs for the year.

Aided by upbeat Boeing results, the Dow Jones blue chip index clocked 13 straight daily gains on Wednesday for the first time since 1987 and S&P500 futures are up again ahead of today's bell. The VIX volatility gauge slipped below 13 for the first time this month.

But Meta Platforms stole the show overnight, with its stock soaring 7% after the digital giant reported a strong rise in advertising revenue - while topping Wall Street financial targets and third-quarter revenue guidance.

Global stocks hit their highest since April last year on Thursday, with European stocks up more than 1% ahead of the ECB decision.

While the ECB is also expected to deliver a quarter-point hike to 3.75%, money markets similarly doubt there's another rate rise left in the campaign - wary of a euro zone economy that's slipping in and out of recession this year as disinflation progresses.

The euro pushed higher against a softer dollar ahead of the announcement and press conference from ECB chief Christine Lagarde. The yen also firmed as the Bank of Japan is expected to keep its easy policy unchanged on Friday.

The rest of the news was dominated by the screed of earnings hitting the headlines.

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A view shows the logo of the European Central Bank (ECB) outside its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo

Shares in oil giants Shell and TotalEnergies fell after they both missed forecasts in reporting big profit drops for the second quarter - the result of the sharp oil price recoil over the last year.

Exxon Mobil and Chevron report later on Thursday.

Barclays was again an outlier in banking. Its shares dived 7% despite plans for a hefty buyback after the British lender warned of growing pressure on its UK business and missed forecasts for its investment bank as a global corporate dealmaking slump persists.

The euro zone's biggest bank BNP Paribas, by contrast, beat Q2 estimates and the stock jumped 4%.

In Asia, Hong Kong shares rose in line with world markets, but mainland China indices continue to stumble under a cloud. China's industrial profits extended this year's double-digit pace of declines into a sixth month, falling almost 17% for the year through June.

Events to watch for on Thursday:

* European Central Bank policy decision, followed by press conference from President Christine Lagarde

* U.S. corp earnings: Exxon Mobil, Chevron, Proctor & Gamble, Colgate Palmolive, T Rowe Price, Aon, Centene, Franklin Resources, Newell Brands, Church & Dwight, Charter Communications

* U.S. Q2 gross domestic product, weekly jobless claims, June durable goods orders, June pending home sales, June wholesale/retail inventories, Kansas City July business surveys

* U.S. Federal Reserve Board holds open meeting to discuss proposed rules to implement the Basel III banking agreement

* U.S. Treasury auctions 7-year notes, 4-week bills

* Italy's Prime Minister Giorgia Meloni meets U.S. President Joe Biden in Washington

(By Mike Dolan; Editing by Toby Chopra; mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

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