ECB rate decision, stocks and data

European autos stocks fell 1.2% Thursday morning, leading sector losses, as a retaliatory fight over electric vehicle subsidies threatened to break out between the European Union and China.

The EU on Wednesday announced an investigation into subsidies given to EV-makers in China, with European Commission President Ursula von der Leyen saying Europe was “open to competition but not for a race to the bottom.”

She told lawmakers, “Take the electric vehicle sector, it is a crucial industry for the clean economy with a huge potential in Europe, but global markets are now flooded with cheaper Chinese electric cars and their prices are kept artificially low by huge state subsidies.”

China soon hit back, with the moves criticized by the secretary-general of the China Passenger Car Association and the Ministry of Commerce, raising the specter of retaliatory tariffs.

Investors will also be monitoring developments in the United States, where a widespread auto workers strike may be called at the end of Thursday.

— Jenni Reid

European stock markets were cautiously higher early Thursday, with the European Central Bank’s monetary policy decision due this afternoon on a knife-edge.

The pan-regional Stoxx 600 index was initially up by 0.1% but was nearly flat by 8:30 a.m. London time.

The benchmark declined in the prior two sessions.

The euro was cautiously higher against the U.S. dollar Thursday morning after hitting a three-month low against the greenback, as U.S. inflation data failed to shift market expectations for a pause in Federal Reserve rate hikes.

The euro was up by 0.15% to $1.074 at 8:30 a.m. Frankfurt time. The EU currency was also 0.1% higher against the British pound, at 0.859.

Opinions are split on whether the European Central Bank will announce a rate hike at 2:15 p.m. Frankfurt time, with markets pricing in a roughly 64% probability of a hike — up from around 40% in recent days.

It marks a shift for the central bank, which in prior meetings has given a much firmer indication of its actions ahead of decision day.

“The ECB has moved to a data-dependent approach and, as such, is likely to be influenced by the deceleration in price pressures highlighted in August’s inflation report and the lacklustre level of gross domestic product growth (0.1%) in Q2,” Henk Potts, market strategist at Barclays Private Bank, said in a note.

“Expectations of stagnating economic activity and inflation returning towards the ECB’s 2% inflation target in 2024 may mean the central bank will keep rates on hold this week. Furthermore, in our view the Governing Council is likely to keep policy rates on hold through to the middle of 2024, with July’s rate rise proving to be the final hike of this cycle.”

— Jenni Reid

Shares of Japanese investment holding company Softbank slipped slightly on Thursday after subsidiary Arm priced its initial public offering at $51 per share.

Softbank shares slipped as much as 2.17% in the morning session, before paring some of its losses later in the day.

At $51 per share, Arm’s fully diluted market capitalization, which includes outstanding restricted stock units, is worth more than $54 billion. Arm’s shares will start trading on Thursday on the Nasdaq.

The U.K.-based company is listing at least 95.5 million American depository shares on the Nasdaq, and SoftBank, its current owner, will control about 90% of the company’s outstanding shares.

Analysts from Goldman Sachs named the European stocks they predict will announce significant buybacks until 2024 — which they say will present substantial upside to their share prices.

Buybacks essentially reduce the amount of shares in circulation and can bump up their price — one of many ways companies can reward shareholders.

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— Amala Balakrishner

Core CPI, excluding food and energy, rose 0.3% on a monthly basis in August, slightly ahead of the 0.2% increase expected by economists polled by Dow Jones. The figure rose 4.3% from a year ago, in line with estimates.

The headline number rose 0.6% last month and in line with Dow Jones estimates. Headline prices increased 3.7% on a year-over-year basis, ahead of the 3.6% expected by economists.

— Samantha Subin

European markets are expected to open in mixed territory Thursday.

The U.K.’s FTSE 100 index is expected to open 2 points higher at 7,537, Germany’s DAX up 14 points at 15,818, France’s CAC 11 points lower at 7,218 and Italy’s FTSE MIB up 90 points at 28,583, according to data from IG.

The main event for investors today is the European Central Bank’s monetary policy decision.

— Holly Ellyatt