A look at the day ahead at Ankur Banerjee’s European and global markets
The time for waiting is almost over as inflation reports from Europe and the US top the agenda of the day, with any surprise likely to impact markets as investors weigh shifting expectations against global interest rates.
First up will be eurozone inflation, which is expected to reach 2.5% in May after remaining stable at 2.4% in recent months, while core inflation is expected to remain stable at 2 .7%, according to a Reuters report. poll.
Investors will be sifting through the data to gauge the likely path the European Central Bank will take on interest rates. Although an interest rate cut in June is almost certain, the focus is entirely on what comes next.
And so investors are likely to be extremely sensitive to even a small loss or miss.
Markets are pricing in a 60 basis point cut by the ECB this year, but much will depend on inflation and wage growth figures in the coming months.
Futures indicate European stock markets are set for a subdued open, with the pan-European STOXX 600 index hitting its lowest point in more than three weeks on Thursday but on track for a 2% gain on the month.
A downward revision to US GDP on Thursday fueled expectations that the Federal Reserve has room to cut rates this year, although investors have taken the bad news (of weaker growth) as bad news for a change, pushing rates higher on US stocks, the dollar and government bonds have fallen lower. .
Markets are pricing in a 35 basis point rate cut from the Fed this year, with a 50% chance of a rate cut in September.
The ever-changing expectations for US interest rates have taken their toll on the dollar, which will suffer a first monthly loss against the euro, sterling, Australian dollar, kiwi and even the yen this year, although the minuscule gains in the yen are the result of the suspected intervention earlier this month.
In Asian hours, stocks were largely up as the dollar regrouped. Chinese shares rose even after data showed the country’s manufacturing activity fell unexpectedly in May, an official factory survey showed.
Meanwhile, markets have so far set aside Donald Trump’s verdict after he became the first US president to be convicted of a crime on Thursday when a New York jury found him guilty of falsifying documents to cover up a payment to secure a to silence porn star. the 2016 elections.
Shares of The Truth Social parent company Trump Media & Technology Group, majority owned by Trump, fell 6.5% late Thursday after the verdict.
Key developments that could affect the markets on Friday:
Economic events: May inflation report for Eurozone and France, April retail sales data for Germany
(This story has been refiled to correct the grammar of the word “head” in paragraph 2 and the spelling of the word “Reserve” in paragraph 8)
(Editing by Muralikumar Anantharaman)
