5 things to start your day: Europe

Good morning. The Bank of England may deliver an interest rate cut. Japan's central bank drives a yen rally and roils equities. Oil markets

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Good morning. The Bank of England may deliver an interest rate cut. Japan's central bank drives a yen rally and roils equities. Oil markets are back on edge as Middle East tensions rise. Here's what people are talking about. Please note: Our email domain is changing, which means you'll be receiving this newsletter from noreply@news.bloomberg.com. Update your contacts to ensure you continue receiving it -- check out the bottom of this email for more details.

BOE cut looms?

It's a close call, but Bank of England policymakers are likely to cut interest rates for the first time since the start of the pandemic, after inflationary pressures receded. Investors see a 57% chance for a quarter-point cut in the key rate to 5%, while most economists surveyed by Bloomberg expect such a move. Borrowing costs stuck at a 16-year high for almost a year have weighed on the economy, which is struggling to emerge from a shallow recession. Governor Andrew Bailey will make his first significant remarks at the press conference since before the election campaign. The BOE meeting follows a Federal Reserve Chair Jerome Powell saying a US rate cut could come as soon as September. He spoke after the central bank voted to leave its benchmark at the highest level in more than two decades.

Rates roil Japan

Japanese stocks tumbled, with the Topix index falling the most since April 2020 in a broad selloff. The yen's sharp rally weighed on exporters, and the BOJ's historic tightening moves boosted rates and dragged down real estate shares. The Topix fell as much as 3.9%, with all sectors declining. A measure of property stocks plunged while automakers and department stores, which had benefited from booming tourist spending on the back of a weaker yen, also fell. The Japanese currency gained to the strongest since March against the dollar after the Bank of Japan raised interest rates and strategists are suggesting it could reach 140 to the dollar.  "The BOJ's rate hike raises two concerns — one on the yen, which is a headwind for exporters that had been benefiting, and the other is on whether the economy will hold up," said Tetsuo Seshimo, portfolio manager at Saison Asset Management Co. "There are still many unknown factors."

Tech's mixed bag

Tech companies continued to deliver the mixed performance that has roiled markets. Meta Plaforms reported better-than-expected sales for the second quarter, offering evidence that the company's investments in artificial intelligence are helping it sell more targeted and personalized advertisements. That progress, which sent the social media company's shares up in late trading Wednesday, will buy time for Chief Executive Officer Mark Zuckerberg to invest in more future-looking products. At Nvidia, the wild ride this week is headed for the record books. The world's third-most-valuable company has added a record $329 billion in value with a 13% rally, a day after a 7% rout wiped out more than $193 billion from the now $2.9 trillion company. At Arm, shares tumbled in late trading after the chip company held off on boosting its annual forecast, raising concerns that it's not confident in future growth prospects. The shares declined more than 8% in extended trading. And Qualcomm saw a post-market rally sputter on Wednesday, fueled by concerns that the phone market is recovering more slowly than investors had hoped. Read Mark Cranfield's musings on the Great Rotation below.

Oil on edge

Oil advanced after surging Wednesday as Iran was reported to have ordered a retaliatory strike on Israel for killing a Hamas leader on its soil. Brent crude broke through $81 a barrel after jumping 3.6% in the previous session. Iran's Ayatollah Ali Khamenei ordered a direct strike on Israel, the New York Times reported. That comes after Iran said Israel assassinated the political leader of Hamas in Tehran, shortly after killing a senior member of Hezbollah in Beirut. The escalation comes before a review meeting by key members of the Organization of the Petroleum Exporting Countries and its allies. Delegates expect the group's session later Thursday to be routine, making no changes to plans to restore production starting in the fourth quarter. Bullishness has been driven by the tensions in the Middle East — the source of about a third of the world's crude — as well as the OPEC+ curbs and expectations that monetary easing would boost US demand.

UK's IPO boom

Potential initial public offerings by a slew of UK financial services firms could drive the next stage of Europe's recovery after momentum in new listings slowed sharply. Hope is picking up after Bloomberg reported that backers of Canopius Group are exploring an IPO for the the Lloyd's of London insurance firm. An IPO is also among the options being pondered by Banco Santander SA for its UK payments subsidiary Ebury, Bloomberg has reported. Meanwhile, the publication of Revolut Ltd.'s annual accounts sparked chatter about an IPO at some point in the future. The British challenger bank said it was bringing its "financial processes in line with the standards expected from publicly listed companies." Revolut previously said it wouldn't consider listing in London, but now it seems to have since softened that stance.

Coming up

Today's data include the BOE rate decision and PMIs in Spain, Italy, France, Germany and the Eurozone. We will hear from the BOE's Bailey and Pill, and later in the day, we get US global manufacturing PMI. Earnings to watch for include Barclays, SocGen, LSE, Credit Agricole, VW, BMW, Rolls Royce and Shell.

What we've been reading

This is what's caught our eye over the past 24 hours. Xi's embrace of Meloni shows China has use for friends in Europe Ackman's Pershing Square USA pulls IPO after slashing target China private factory gauge dips for first time in nine months Ukraine receives first F-16 fighter jets after long wait Thames Water cut to junk by S&P, following Moody's move Harris Team meets Shapiro, Labor Balks at Kelly as VP pick nears Almost half of dementia cases can be fended off, study says

And finally, here's what Mark is interested in this morning:

Meta Platform shares surged in after-hours trading, following Nvidia's record $329 billion jump in value which suggests it is premature to be writing the obituary for AI-driven strategies. Indeed, the rotation into small cap stocks could be over before having a chance to gain serious traction. Investor jitters toward the tech sector crystalized last week when Tesla plunged after delivering a quarter of disappointing profit and postponing a highly anticipated unveiling of autonomous taxis. Since then, Tesla's share price has clawed its way higher and almost erased those losses. Then along comes Meta Platforms, which reported better-than-expected sales for the second quarter. Importantly, it offered evidence that the company's investments in artificial intelligence are helping it sell more targeted and personalized advertisements. All of which is making the most recent set back for the Nasdaq gauge look increasingly like another dip-buying window for investors who have been faithfully doing so since late 2022. That said, there is still hope for rotation plays to get new wings later this month, when Nvidia reports quarterly earnings. Although it's worth recalling the previous announcement in May was the trigger for the company's share price to soar and its market cap to reach $3 trillion. Mark Cranfield is a macro strategist for Bloomberg's Markets Live team, based in Singapore.

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