A look at the day ahead in European and global markets from Ankur Banerjee

Signs of an economic slowdown across the globe, lingering worries over the U.S. debt ceiling and ever-present fear of a deepening banking sector crisis have kept investors skittish and risk averse through the week and Friday has been no different.

The MSCI Asia ex-Japan index eased 0.5%, with Japan’s Nikkei indeed the exception, as it has been for the year, rising 0.8% on the day. The U.S. dollar was clinging to Thursday gains and was set to snap a two-week losing streak. Gold remained steady while short-covering pushed oil prices higher.

Investor focus will turn to a slew of economic data out of Europe, with British gross domestic product data showcasing the state of economy and likely influencing sterling’s fate. The pound was still reeling from a dive on Thursday after the Bank of England raised interest rates and kept the door open for further monetary tightening.

Also on the deck will be inflation reports from France and Spain that will highlight what kind of impact European tightening has had on prices in the region.

Data in U.S. hours showed the labour market might be showing signs of cracks, whereas inflation eased a bit, leading traders to bet that the Federal Reserve is likely done with tightening.

Meanwhile, worries over national debt remain, with Treasury Secretary Janet Yellen due to discuss the impasse over raising the government debt ceiling with board members of the Bank Policy Institute lobby group next week.

A meeting between President Joe Biden and top lawmakers scheduled for Friday has been postponed, stoking further investor concern. The federal government could run out of money to pay its bills as soon as June 1 – in two and a half weeks – if the ceiling is not raised.

Elsewhere, the U.S. regional banking saga shows no sign of stopping, with PacWest Bancorp (PACW.O) the latest to face investor ire after the Los Angeles-based lender said deposits declined and that it had posted more collateral to the Fed to boost liquidity.

“The news headlines increased our customers’ fears of the safety of their deposits,” the bank said.

Finally, it looks like Twitter will soon have a new CEO. Elon Musk said (on Twitter, naturally) he has found a new chief executive for the social media site, but did not name the person, while the Wall Street Journal reported that Comcast NBCUniversal executive Linda Yaccarino was in talks for the job.

Reporting by Ankur Banerjee in Singapore; Editing by Christopher Cushing

SYDNEY, May 8 (Reuters) – Asian shares crept higher on Monday as investors braced for a week where U.S. inflation data will test wagers the next move in interest rates will be down, while worries about a possible credit crunch weighed on the dollar.

Friday’s robust U.S. payrolls report has already delivered a setback to easing hopes and any upside surprise on consumer prices would challenge bets for a rate cut as soon as September.

Forecasts are for a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation slowing just a tick to 5.5%. Later Monday, the Federal Reserve’s survey of loan officers will draw an unusual amount of attention as markets seek to gauge the impact of regional banking stress on lending.

“The survey should point to further broad-based tightening in bank lending standards,” said Bruce Kasman, head of economic research at JPMorgan.

“Continued stress in the banking system does, of course, increase concern that a disruptive financial market event is on the horizon,” he added. “Though our analysis suggests that the impact of a credit tightening against an otherwise healthy backdrop tends to be limited.”

Caution made for a slow start in markets and MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) edged up 0.3%, while Japan’s Nikkei (.N225) eased 0.3%. S&P 500 futures and Nasdaq futures were both off 0.1%, after jumping on Friday in the wake of Apple’s (AAPL.O) upbeat results.

While the S&P 500 is up almost 8% for the year so far, all of that is due to just five mega stocks which have collectively risen by 29% so far this year and trade at a 49% premium to the rest of the index.

Bond markets were still stinging from the strong payrolls report with U.S. two-year yields up at 3.95% after briefly getting as low at 3.657% last week. Futures imply a near 90% chance the Fed will keep rates steady at its next meeting in June, and a 75% probability of a cut in September.

The market is still pricing in at least one more hike from the European Central Bank, while the Bank of England is widely expected to lift its rates by a quarter point on Thursday. The diverging outlook on rates has underpinned the euro and pound, with the latter hitting a one-year high on the U.S. dollar last week. The euro was holding at $1.1018 on Monday, just short of its recent top of $1.1096.

“While it is premature to get too ‘beared up’ on the dollar until a clearer peak in U.S. rates is seen, the U.S. banking sector travails that have no easy/costless solutions, continue to make for a mildly bearish medium-term story,” said Alan Ruskin, head of global FX strategy at Deutsche Bank.

“Certainly it imposes more growth constraints and a greater stagflationary bias than for major competing economies.”

The dollar has fared better on the yen as the Bank of Japan remains the only central bank in the developed world to not have tightened policy. The dollar stood at 135.19 yen , with the euro at 148.93 and not far from its recent 15-year peak of 151.55.

The prospect of a pause in U.S. rate hikes has been a boon for non-yielding gold which was holding at $2,015 an ounce after nearing a record high last week. Oil prices have been going the other way as fears of a global economic slowdown outweighed planned output cuts to see U.S. crude shed more than 7% last week. Brent was last up 3 cents at $75.33 a barrel, while U.S. crude added 5 cents to $71.39 per barrel.

Reporting by Wayne Cole Editing by Shri Navaratnam

By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks ended little changed on Monday as investors took in the weekend auction of First Republic Bank and braced for this week’s expected interest rate hike from the Federal Reserve.

The KBW regional banking index dropped 2.7%, while shares of JPMorgan Chase & Co, which won the auction of failed lender First Republic, rose 2.1%.

JPMorgan will pay the U.S. Federal Deposit Insurance Corp $10.6 billion to take control of most of the regional bank’s assets.

Investors have been on edge about the banking system’s health following the collapse of two other regional banks in March.

“Hopefully this is sort of the last of the banking crisis, but something else might surface at some point,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

Market watchers also digested the latest economic news, which suggested to some that the Fed may need to stick to its tightening cycle for the near term. The Institute for Supply Management (ISM) said on Monday its manufacturing PMI rose last month from March.

The Fed, which has been raising rates to cool inflation, is expected to hike rates an additional 25 basis points on Wednesday.

The Dow Jones Industrial Average fell 46.46 points, or 0.14%, to 34,051.7; the S&P 500 lost 1.61 points, or 0.04%, at 4,167.87; and the Nasdaq Composite dropped 13.99 points, or 0.11%, to 12,212.60.

Energy was down the most of the major S&P 500 sectors, falling 1.3% as crude oil prices declined .

Recent earnings, however, provided some lingering optimism for investors, Ghriskey said. First-quarter results from S&P 500 companies have mostly beaten expectations, easing economic concerns.

“We’ve had good earnings relative to expectations. Analysts for now have backed off of lowering estimates,” he said. “If we could have rates at this level … and corporate America continue to deliver, it’s very positive.”

Recent upbeat earnings from Alphabet Inc, Microsoft Corp and Meta Platforms Inc helped the benchmark S&P 500 notch its second consecutive month of gains on Friday.

The S&P 500 technology index climbed 0.2% on Monday, offsetting some of the day’s weakness.

Volume on U.S. exchanges was 10.24 billion shares, compared with the 10.37 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancers on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favored decliners.

The S&P 500 posted 35 new 52-week highs and one new low; the Nasdaq Composite recorded 88 new highs and 188 new lows.

(Additional reporting by Ankika Biswas and Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Richard Chang)