Earnings, gas worries keep Europe subdued

·3-min read

European shares have limped lower and the region's bond markets have rallied as some disappointing earnings, this week's looming US interest rate hike and an escalating gas crisis kept the mood cautious.

Asia had been buoyed overnight by new Chinese plans to tackle its property crisis and by tech giant Alibaba applying for a primary listing in Hong Kong, but Europe couldn't keep it going.

The pan-European STOXX 600 index stalled on Tuesday as higher commodity stocks and a profit upgrade from consumer giant Unilever were offset by a six per cent dive in UBS shares and broader recession fears.

"The key question we have as these earnings come out is how much pricing power do these (consumer facing) firms have," said Diamond Hill international equities portfolio manager Krishna Mohanraj, referring to the pressures of higher inflation.

Shares in US retailer Walmart had slumped 10 per cent after the bell after it slashed its forecasts on Monday due to those exact issues.

But Unilever, which makes everything from laundry detergent to ice-cream, raised its full-year profit forecasts in Europe owing to what its CEO Alan Jope said had been "strong pricing to mitigate input cost inflation".

European Union countries were also preparing to approve weakened emergency proposals to curb their gas usage. Russia's Gazprom had warned on Monday that it would reduce flows further this week due to another maintenance issue.

Investors are also awaiting a likely 75 basis point Federal Reserve interest rate increase on Wednesday, with markets pricing about a 10 per cent risk of a larger hike, as well as waiting to see whether economic warning signs prompt a shift in rhetoric.

The International Monetary Fund is set to publish its closely watched world forecasts later, which are expected to point to even slower growth and higher inflation.

Global tech giants Microsoft and Google are reporting after the bell on Wall Street, followed by Facebook owner Meta on Wednesday and Apple and Amazon on Thursday.

It adds up to more than $US7.5 trillion of market cap, Deutsche Bank's Reid pointed out.

GM, NXP Semiconductors, Raytheon Technologies, Coca-Cola and McDonald's will also report later.

In Asia, MSCI's broadest regional index outside Japan had bounced 0.5 per cent.

Chinese stocks had jumped after reports the country would set up a fund of up to $US44 billion to help property developers.

Hong Kong's Hang Seng Index ended 1.7 per cent higher on the Alibaba news although Japan's Nikkei fell 0.16 per cent.

In currencies, the dollar was flat not too far below recent milestone highs as uncertainty continued to swirl around the interest rate and economic outlook.

The euro hovered at $US1.0215 but was hemmed in by uncertainty over Europe's energy security, which is not helped by a looming cut in the westbound flow of Russian gas.

The yen steadied at 136.54 per dollar. The US dollar index, which touched a 20-year high this month, was down slightly at 106.380.

Oil prices rose further on expectations Russia's reduction in natural gas supply to Europe could encourage a switch to crude, with Brent futures last up 1.3 per cent at $US106.45 a barrel and US crude up 1.25 per cent at $US97.92 a barrel.

Benchmark 10-year Treasury yields fell to 2.875 per cent and Germany's benchmark 10-year bond yield fell to a two-month low of just below 1 per cent as growth worries gave support to bonds.

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