Markets mixed as tech boosts US stock futures, Europe dips

Global stock markets were mixed on Wednesday as recession fears and banking sector strain weighed on European stocks and the dollar while Wall Street stock futures firmed on bullish updates from Microsoft (MSFT.O) and Google parent Alpha-bet (GOOGL.O).

Europe’s STOXX 600 share index fell 0.8% as regional banking stocks (.SX7E) dropped by the same amount.

MSCI’s broad index of global stocks (.MIWD00000PUS) was steady, after Asian markets outside of Japan (.MIAPJ0000PUS) closed higher in line with rising Wall Street futures, reported Reuters.

The dollar index , which measures the currency against other majors, fell 0.6% in a move that pushed up sterling and the euro.

Shares in troubled San Francisco-based First Republic Bank (FRC.N) hit a record low on Tuesday as it disclosed that deposits had plunged by just over $100 billion, reviving fears for smaller US lenders that began with Silicon Valley Bank’s collapse in March.

But ahead of quarterly results from Facebook parent Meta Platforms (META.O) later in the day, Nasdaq futures were up 1.2% on Wednesday morning in Europe and S&P 500 futures gained 0.4%.

Microsoft rose 8% in US pre-market dealings after its quarterly results, issued after the U.S. stock market closed on Tuesday, beat analyst forecasts. A $70 billion share buyback announced by Google parent Alphabet also looked set to insu-late the mood on Wall Street from banking sector troubles.

US and European financial conditions have tightened significantly since the Federal Reserve and European Central Bank embarked on their most aggressive interest rate-hiking cycles for decades last year to battle soaring inflation.

This has dented confidence towards loan-dependent sectors such as real estate, and raised questions over how global banks will deal with defaults.

Deposit flight from US banks has prompted investors to dial down profit expectations for the global banking sector, with banks under pressure to raise interest rates on savings accounts to keep hold of customers’ money.

“Banks around the world want to make sure their deposits will stay,” said Jason Da Silva, director of global investment strategy at Arbuthnot Latham in London.

“So there’s an expectation in the market that banks’ earnings and net interest margins have probably peaked.”

The benchmark S&P 500 (.SPX) and Nasdaq (.IXIC) indexes both fell heavily on Tuesday after weak consumer confidence data, while bonds rallied sharply and interest rate futures markets priced in a higher chance of Fed cuts later in the year.

US 10-year yields fell nearly 12 basis points (bps) on Tuesday, their sharpest drop in more than a month, while steadying about 2 basis points higher at 3.398% on Wednesday morning in Europe.