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European stock indexes were mixed on Thursday as global recession fears weighed on markets and soaring COVID19 cases in China countered earlier optimism about the country dropping its strict zero-COVID policy.

S stock index futures pointed to a more upbeat tone on Wall Street, with Nasdaq 100 e-minis up 0.6%Lower liquidity during the holiday period and a lack of news from central banks means market moves can be “choppy”, lacking consistent direction, said Craig Erlam, senior market analyst at OANDA.

Erlam said that uncertainty about how China’s policy reversal would affect global supply chains could become more of a focus for investors in the coming days, but that there was not enough information yet.Investors were also kept cautious due to fears of an economic slowdown. Risk appetite was subdued for much of 2022 as global central banks raised interest rates in an attempt to bring down inflation.

The S&P 500 is on track for its biggest annual drop since 2008 and many investors are predicting a recession in 2023. Markets were pricing in a 71% chance of a 25-basis point rate hike when the US Federal Reserve holds a policy review in February, with US rates expected to peak in the first half of 2023.

The Fed raised interest rates by 50 bps earlier in December after delivering four consecutive 75 bps hikes in the year, but it has said it may need to keep higher interest rates for longer.The US dollar index was down 0.1% at 104.

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