FTSE 100, DAX, CAC 40

Watches of Switzerland rose to the top of the Stoxx 600, rising 11.3%, after reporting bumper annual results in a buoying sign for the luxury market.

On the other end of the European benchmark, Swedish energy company Nibe Industrier dropped 3.7% a day after announcing the Dutch competition authority had approved its acquisition of Netherlands-based energy developer Climate for Life.

— Karen Gilchrist

David Roche, president of Independent Strategy, shares his predictions for central banks’ monetary policy and its implications for the global economy. He also weighs in on the outlook for the war in Ukraine.

The U.K. economy is still in a state of “two steps forward, one step back,” Berenberg senior economist Kallum Pickering said, after GDP recorded a 0.1% monthly contraction in May, better than the 0.3% consensus forecast.

The figures “highlight an economy that continues to struggle for growth amid severe headwinds from high inflation and tightening financial conditions,” Pickering said, even if the U.K. avoided a widely-forecast recession over the winter.

Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said the figures show “the economy remains listless and that the recovery signalled by many of the business surveys, such as the PMI, has not taken hold yet.”

Tombs expects the economy to “regain a little momentum” in the second half due to a rise in households’ real expenditure, as declining energy prices and stabilizing goods prices outweigh the drag from mortgage refinancing. But he notes this rise will still lag incomes, with higher borrowing costs triggering “downturns in both business investment and residential investment.”

Paul Dales, chief U.K. economist at Capital Economics, said in a note it remained difficult to get a full sense of the U.K.’s economic health as May saw an extra holiday for the King’s coronation as well as ongoing strike action.

— Jenni Reid

Shares of U.K. homebuilders fell in morning trade after Barratt Developments warned of a challenging environment and said it expected a further slowdown in demand.

The company issued a trading update in which it said it expected 13,250 to 14,250 home completions in the full-year 2024, down from 17,206 in 2023.

It said it would be affected by “significant macro-economic headwinds, most notably persistent inflation and a higher interest rate environment, which will impact UK economic growth, employment, and consumer confidence and spending.”

It expects adjusted profit before tax for full-year 2023 to be in line with expectations.

Barratt shares were down 5% at 8:40 a.m. BST, with fellow builders Taylor Wimpey, Persimmon and Berkeley Group also trading lower.

European stocks were cautiously higher in early trade, with the benchmark Stoxx 600 index gaining 0.9%.

France’s CAC 40 climbed 0.14%, though the U.K.’s FTSE 100 and Germany’s DAX were lower by 0.07% and 0.04%, respectively.

The U.K.’s FTSE 100 is seen opening around 3.6 points higher at 7,420, according to IG data.

Germany’s DAX is on course for a 13.5 point rise to 16,038 and France’s CAC 40 is expected to climb by around 19 points to 7,356, with Italy’s MIB up 43.4 points to 28,660.

— Jenni Reid

The odds that the Federal Reserve will raise rates again, after its next meeting on July 26, have faded on the back of Wednesday’s weaker-than-expected consumer price report for June.

According to the CME FedWatch tool, interest rate traders still see a 95% certainty that the central bank lifts its benchmark fed funds rates a quarter point, to 5.25%-5.50%, on July 26. But after that, things get dicey.

The chance that the Fed will go another quarter point at its September meeting (it skips August), has fallen to 13.3%, down from 22.3% on Tuesday and 18.1% a week ago. Odds that fed funds will stand a half point higher by the end of the Fed’s Nov. 1 meeting are now 26.5% compared with 36.2% yesterday and 31.6% one week ago.

By the time of the Fed’s last policy meeting of the year, on Dec. 13, odds that rates will be a half point higher than today’s 5.00%-5.25%, have slumped to 20.8% now from 32.4% on Tuesday and 28% one week back.

Meanwhile, the odds that the Fed will have reversed this month’s rate increase by yearend have risen to 14.9% from 10.2% yesterday and 12.6% last week.

— Scott Schnipper

HSBC identified key stocks in the supply chain that may benefit from Tesla’s push into humanoid robots.

Tesla launched its human-shaped robot, called “Tesla Bot,” last September. The company claims it will eventually be capable of “performing unsafe, repetitive or boring tasks.”

In May, the company showed off a significantly improved version. It highlighted progress in walking posture, control of joint actuators, environmental sensing capabilities, and artificial intelligence training.

The bank identified the companies behind key components for humanoid robots, such as machine vision systems, control systems and servo motors.

CNBC Pro subscribers can read more here.

— Ganesh Rao

UBS has upgraded a big pharma stock to a buy rating after the drug maker’s trial of a lung cancer medication delivered poor results.

The Swiss bank believes investors should overlook the results of the trial as the pharmaceutical giant’s 30-drug-trial pipeline makes it a “leading player in this field” and expects shares to rise by nearly 30% in a year.

CNBC Pro subscribers can read more here.

— Ganesh Rao

South Korea’s central bank held its benchmark interest rate unchanged at 3.5%, the fourth straight meeting the Bank of Korea has done so after last hiking rates in January.

The bank wrote that although the country’s inflation rate continues to slow down, it is expected to rise above the BOK’s target level of 2% “for a considerable period of time.”

The BOK also forecasts that inflation will rise to around 3% after August, and added the need for an additional hike will be judged “while assessing the changes in domestic and external policy conditions.”

South Korea’s inflation rate came in at 2.7% for June, and is at its lowest level since September 2021.

— Lim Hui Jie

The consumer price index rose 0.2% in June and 3% from a year ago, the Labor Department said Wednesday. Economists polled by Dow Jones had expected a monthly increase of 0.3% and 3.1% on an annualized basis.

 Core CPI, which excludes volatile food and energy prices, also increased less than anticipated.

— Samantha Subin