European markets set to rebound after Wall Street rally; ECB 'jumbo' rate hike a possibility

European Central Bank could unleash a jumbo rate hike as the economy slides toward recession

The European Central Bank is expected to frontload a series of rate hikes and sacrifice growth in the region due to the rising cost of living which is threatening to surge even higher. 

ECB Executive Board Member Isabel Schnabel’s speech in Jackson Hole set the tone for the upcoming policy meeting this week. With inflation in the euro zone projected to rise to at least 10% in the coming months and the risk of consumer prices rocketing higher, a “jumbo” rate hike of 75 basis points on Thursday is certainly a possibility.

“As frontloaded hikes can have a bigger impact on inflation expectations than a more gradual approach, a 75bp move could make sense,” said ECB watcher and Berenberg’s Chief Economist Holger Schmieding in a research note. 

Read the whole story here: European Central Bank could unleash a jumbo rate hike as the economy slides toward recession

— Holly Ellyatt

U.S. dollar has legs to move even higher, Wells Fargo strategist says

The U.S. dollar has room to inch up even higher thanks to rate differentials on the back of a hawkish Federal Reserve, according to Wells Fargo Securities FX strategist Brendan McKenna.

“We think a lot of these international banks will not be able to raise rates as aggressively as the markets are priced in for,” he told CNBC’s “Squawk Box Asia.”

“So it’s kind of a combination of a more hawkish Fed and a less hawkish tightening cycle from these international central banks that support the dollar over the remainder of this year,” he said.

–Jihye Lee

Goldman Sachs raises Fed hike forecasts for this year

Goldman Sachs revised its forecasts for upcoming Federal Reserve rate decisions year.

Analysts led by chief economist Jan Hatzius said in a note that the firm expects a 75-basis-point hike in September, up from a previous forecast of 50 basis points, as well as a 50-basis-point hike in November, also revised from a previous projection of 25 basis points.

It also expects a 25 basis point hike in December — citing officials’ recent hawkish commentary.

The note said Fed officials “have seemed to imply that progress toward taming inflation has not been as uniform or as rapid as they would like,” the note said.

–Jihye Lee

CNBC Pro: Wall Street pro predicts when the S&P 500 will rally — and reveals how to trade it

Market volatility is here to stay, according to market veteran Phil Blancato.

But the president and CEO of Ladenburg Thalmann Asset Management sees a “strong rally” on the cards as market conditions improve.

He predicts when the rally will be, and names his top picks to trade the volatility.

Pro subscribers can read more here.

— Zavier Ong

All major averages close higher, Nasdaq snaps 7-day losing streak

Stocks rallied Wednesday as Wall Street looked past concerns about aggressive rate hikes coming from the Federal Reserve.

The Dow Jones Industrial Average gained 435.98 points, or 1.40%, to end the day at 31,581.28. The S&P 500 rose 1.83% to 3,979.90 and the Nasdaq Composite ticked up 2.14% to 11,791.90, breaking a seven-day losing streak.

—Carmen Reinicke

European markets: Here are the opening calls

European stocks are expected to open cautiously higher on Wednesday with the U.K.’s FTSE index seen 18 points higher at 7,560, Germany’s DAX 33 points higher at 13,944, France’s CAC 40 up 18 points at 6,616 and Italy’s FTSE MIB up 42 points at 23,029, according to data from IG.

Data releases include preliminary euro zone unemployment data for the second quarter as well as second quarter gross domestic product. The latest U.K. inflation numbers for July will be released as well as preliminary second quarter Dutch GDP.

Earnings come from Uniper, Carlsberg, Persimmon, Balfour Beatty, BAT and National Grid.

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