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

Dolan

The worst day for the S&P500 since 2022 and mounting

central bank easing bets suggest markets' serene 'soft landing'

scenario is being questioned as China growth worries and U.S.

election risks mount.

Even though a withering swoon in megacap tech stocks this

week comes in the thick of the corporate earnings season, the

incoming aggregate profit growth picture remains buoyant

overall. A first cut of second-quarter U.S. GDP estimates later

on Thursday will hold that further up to the light.

Jitters about the lofty valuations of the so-called

Magnificent Seven stock leaders, worries about excessive spend

in artificial intelligence and exposure to China's stuttering

economy have all been cited variously for the sharp pullback.

Wednesday's Wall Street stock rout, which saw the S&P 500

mark its first 2%-plus loss in 356 sessions after sharp

post-earnings losses for Tesla and Alphabet,

sent shares tumbling around the world overnight.

The VIX volatility gauge topped 19 for the first time

since April even as stock futures tried to find a foothold

on Thursday.

But aided by stepped-up Federal Reserve interest rate cut

bets, a second Bank of Canada rate cut of the year on Wednesday

and after China's central bank added more cuts to this week's

surprise monetary easing, there appeared to be a dash for safety

in bonds and havens like Japan's yen and the Swiss franc

surged.

Despite a heavy diary of new Treasury sales this week,

two-year U.S. yields fell to their lowest since

February and the yield curve steepened. Partly on post-election

fiscal worries, the 2-to-30-year yield curve has

turned positive to its steepest in almost two years.

And a discombobulating twist behind the soaring yen, which

hit its best levels since early May, was rising speculation

about a Bank of Japan interest rate rise as soon as next week

just when all its peers are in reverse mode.

Sources told Reuters that the central bank is likely to

debate whether to raise rates next week and unveil a plan to

roughly halve bond purchases in coming years.

China's yuan, recently tied at the hip yen trends,

also jumped.

And yet worries about the world's second largest economy -

which potentially faces a ratcheting of trade tariffs and curbs

after the U.S. election - was a theme through the stock wobble

too.

Europe's China-exposed luxury sector, reeling from this

week's earnings disappointment from LVMH, took another

hit on Thursday as Gucci-owner Kering missed and its

stock plunged 8%.

Another standout loser in Europe was Universal Music

, which plummeted 26% after reporting a slowdown in its

subscription and streaming segment.

Key developments that should provide more direction to U.S.

markets later on Thursday:

* US Q2 GDP, weekly jobless claims, June durable goods orders,

July Kansas City Fed manufacturing survey

* US corporate earnings: AbbVie, American Airlines, Southwest

Airlines, Dow, Eastman Chemical, Honeywell, Union Pacific,

Northrop Grumman, PG&E, Dover, Norfolk Southern, Valero Energy,

DTE Energy, CMS Energy, Baker Hughes, CBRE, Hasbro, Keurig Dr

Pepper, Cincinnati Financial, Principal Financial, Dexcom,

Deckers Realty, Juniper Networks, L3Harris, Verisign,

Weyerhaeuser, Wills Towers Watson etc

* European Central Bank President Christine Lagarde speaks

* US Treasury sells $44 billion of 7-year notes and $90 billion

of 4-week bills

(By Mike Dolan, editing by Christina Fincher

[email protected])