Wall Street expected to open lower ahead of earnings

LONDON, Oct 25 (Reuters) – European stocks were mixed on Tuesday and U.S. futures pointed to a weaker open for Wall Street as investors hoped the Federal Reserve could slow its rate hikes gave way to a more cautious tone in front of the American earnings company.

Asian stocks struggled to make gains on uncertainty over whether President Xi Jinping’s new leadership team would prioritize economic growth in China, where the onshore yuan ended the domestic session with its weakest closing since the end of 2007.

European stock indices opened higher but struggled to hold on to gains, with the STOXX 600 up 0.1% at 11:00 GMT (.STOXX).

The MSCI World Stock Index, which tracks stocks from 47 countries, was flat on the day (.MIWD00000PUS) and MSCI’s main European index (.MSER) ​​rose 0.2%, after falling by compared to a 5-week high earlier in the session (.mser).

Some better-than-expected earnings results also supported sentiment in European stock markets, with Swiss bank UBS (UBSG.S) among those that beat market expectations.

But Europe’s biggest bank, HSBC, reported a 42% drop in third-quarter profits, dragging its shares (.HSBA.L) down 7% and dragging the FTSE 100 as a whole to – 0.8% on the day (.FTSE).

Tech giants Alphabet and Microsoft report earnings later in the session.

After a two-day rebound on Wall Street, US stock futures were in the red, with the Nasdaq e-minis down 0.1% and the S&P 500 e-minis down 0.3 %.

The US dollar index was a bit higher on the day, up 0.2% to 112.06.

The euro slipped 0.2% to $0.98575. The European Central Bank meets on Thursday and is expected to raise rates by 75 basis points.

The British pound rose 0.4% to $1.133. On Monday, Britain’s currency recovered from session lows and gilt yields fell sharply in a sign of relief for investors when former finance minister Rishi Sunak was named the next prime minister. But analysts said investor confidence in the ruling Conservative Party’s ability to manage the economy was still shaken.

Eurozone government bond yields fell, with Germany’s benchmark 10-year yield falling 10 basis points to 2.248%.

German business sentiment fell slightly in October, but the data still beat analysts’ estimates.

The data “suggests that at least business sentiment is bottoming out,” Carsten Brzeski, global head of macro at ING, said in a client note. “However, this does not mean that an improvement in the economy is near.”

Business activity in the United States contracted for a fourth consecutive month, data showed on Monday, suggesting that Fed rate hikes have weakened the economy, raising hopes that the bank central could begin to slow the pace of increases.

Hani Redha, portfolio manager at Pinebridge Investments, said some investors were relieved by “some hope that the pace of central bank tightening may start to slow later this year.”

Economists polled by Reuters said the central bank is unlikely to stop until inflation falls to about half its current level.

Pinebridge’s Redha said earnings estimates had fallen slightly in recent months, but the pace of that had been “fairly modest”.

“The potential relief investors are feeling as the end of the bull cycle nears, which appears to be outweighing the steep decline in earnings estimates.”

Oil prices fell more than $1 a barrel on fears of an economic slowdown weakening demand from the United States and China.

Reporting by Elizabeth Howcroft

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