Morning Bid: Stocks stunned by ASML curveball, pound plunges

A look at the day ahead in U.S. and global markets from Mike Dolan

World markets struggled to find a footing on Wednesday after Europe's ASML sideswiped the global chip sector late yesterday with a surprisingly weak orders outlook and investors prayed the flub was a one-off as third-quarter earnings updates stream in.

There was better news for bond markets - with yields declining on a mix of falling oil prices and significant European disinflation that underscores expectations of another European Central Bank interest rate cut on Thursday.

And that picture was replicated in Britain on Wednesday, with headline inflation dropping much further below the Bank of England's 2% target than markets had bet on - upping bets on a BOE rate cut next month and knocking the pound back to its lowest in almost two months.

With European fixed income markets rallying again, U.S. Treasury yields also fell back close to 4% and Federal Reserve futures are back fully pricing a quarter point U.S. rate cut on Nov. 7.

But much of the heat and price action was in stocks.

While banks and pharma firms dominate Wednesday's diary, reverberations from ASML's big miss knocked Wall Street back from record highs on Tuesday, adding to a swoon in energy stocks from falling oil prices and throwing a spotlight on Thursday's update from Taiwan's chip behemoth TSMC.

The read across to AI-darling Nvidia saw its shares recoil almost 5% from Monday's new record, with a small recovery pencilled in ahead of today's bell.

However ASML itself, the world's biggest chipmaking equipment manufacturer, shed another 4% in Europe on Wednesday, adding to the 16% loss on Tuesday - its steepest one-day decline in four years.

And in a bad week for European stocks more generally, the luxury sector remained under the cosh as France's LVMH dropped 7% due a fall in third-quarter sales hit by waning customer confidence in China.

China's struggling economy, U.S. investment curbs on its technology sector and a brewing tariff trade war between Beijing and Brussels tie all these stories together.

And despite slightly frantic Chinese stimulus measures in recent weeks to lift the flagging economy, the initial stocks boost from that is fading fast. China's mainland index and Hong Kong's Hang Seng ended in the red again on Wednesday - both more than 10% off post-stimulus highs.

Beijing will hold a press conference on Thursday to discuss promoting the "steady and healthy" development of the property sector, the State Council Information Office said, although that's failed to reignite much market excitement.