Shifting central banks, Facebook status update restart selloff

By Marc Jones

LONDON (Reuters) - The euro and sterling edged lower as the ECB and BoE prepared to face their growing inflation challenges later on Thursday while stock markets turned red again after a disappointing status update from the firm formally known as Facebook.

Europe's main bourses were down 0.4% early on [.EU] as the prospect of a second UK interest rate hike in three months, a more hawkish ECB and the shock of Wednesday's 20% plunge in Facebook owner Meta's shares ended a 3-day rally.

In the currency market, the defensive mood allowed the dollar to regain its footing. Inflation pressures were weighing on bonds, although with so much central bank activity later it felt like the real action was still to come.

The Bank of England is forecast to raise rates to 0.5% later, with the UK government also expected to announce an energy bill subsidy.

Over in Frankfurt, the European Central Bank is not likely to offer up policy changes, but this week's record high euro zone inflation reading and recent strong labour data have raised expectations for more hawkish shift in tone.

"The equity markets took a beating yesterday," said Societe Generale analyst Kit Juckes. "They haven't moved much further this morning, but the risk-positive move we had at the start of the week has definitely run out of steam ahead of all the central bank meetings".

U.S. stocks futures were sharply lower, especially for the tech-dominated Nasdaq after Facebook, Instagram and Whatsapp firm Meta's disappointing earning and outlook had vaporised $200 billion of its market value.

Other social media companies also fell hard after the bell, including Twitter, Pinterest and Spotify, which has been beset by a row over COVID vaccination misinformation.

"Investors looking at Meta are starting to realize that buying their stock is no longer mostly an investment into their ad platform," said Flynn Zaiger, CEO of social media agency Online Optimism.

"Investing in Meta now looks more like a commitment that you believe that the metaverse will replace much of the internet consumers' experience today." (Graphic: Currency markets in 2020, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjkeypr/Pasted%20image%201643811970966.png)

50 PERCENT CLUB

In emerging markets pressure was building on Turkey's lira again after inflation there came in at nearly 50% and Russia's rouble wobbled again as tensions over Ukraine were fanned by the movement of 3,000 U.S. troops to eastern Europe.

It came as oil prices also eased after OPEC and its allies stuck to planned moderate output increases and U.S. ADP jobs data had been weaker than hoped.

Brent crude fell 77 cents, or 0.8%, to $88.71 a barrel. U.S. West Texas Intermediate crude

"This morning's dip might be a result of the shockingly low U.S. ADP employment print last night, but we believe the supply squeeze may drive oil prices higher through this year," said Howie Lee, economist at OCBC in Singapore.

 

(Additional reporting by Ahmad Ghaddar in London, editing by Ed Osmond)