A look at the day ahead at Ankur Banerjee’s European and global markets
The cheers from Wall Street darling Nvidia’s strong results didn’t last long, as fears that rates would stay higher for longer once again dampened the AI rally.
Retail sales for April in Britain and detailed GDP data for Germany headline the European economic calendar, keeping investors risk-averse, putting pressure on stocks and sending the dollar higher.
Futures point to a weak open in Europe, with the STOXX 600 index poised for a weekly decline of almost 1%, the biggest drop since mid-April. Britain’s top share index will also be in the spotlight following Prime Minister Rishi Sunak’s surprise call for a general election.
The Bank of England is also dealing with British inflation, which slowed less than expected in April. Markets are now pricing in a 30 basis point cut this year, and expectations are that the BOE will likely start cutting rates at its September meeting, although markets are not ruling out August, both post-election.
Meanwhile, traders are pricing in 58 basis points of cuts in 2024 from the European Central Bank, up from 67 at the start of the week in the wake of key payroll data.
The ECB has long pinned its hopes on a rate cut on this crucial wage figure, but has essentially committed to policy easing on June 6, so the new figure is likely to influence policy decisions later in the year.
As for the Federal Reserve, markets are now not expecting a rate cut until December and are pricing in a 36 basis point easing following robust economic data. Not so long ago (in January), markets had priced in an easing of as much as 150 basis points this year.
In company news, the focus will be on Hargreaves Lansdown after Reuters reported that the UK retail investment platform’s largest shareholder, Peter Hargreaves, was open to an initial public offering of the company.
Key developments that could affect the markets on Friday:
Economic events: Germany Q1 GDP, UK April retail sales, Sweden April PPI
(By Ankur Banerjee. Editing by Sam Holmes)
