By Wayne Cole
(Reuters) – A look at the day ahead in European and global markets by Wayne Cole.
Stock markets started the week on a positive note, helped in part by signs of accelerating factory activity in Asia, where the private Caixin survey showed China’s main factory index hitting a two-year high.
Factory activity grew for the first time in a year in Japan, and grew at the fastest pace in two years in South Korea. South Korean markets got an extra boost from news that there could be huge oil and gas reserves off the country’s coast.
Oil prices rose after OPEC+ agreed on Sunday to extend the bulk of oil production cuts until 2025, although some cuts will be reversed from October 2024. [O/R]
Indian markets were eyeing record highs as Prime Minister Narendra Modi is likely to expand his alliance’s majority in parliament when election results are announced on Tuesday, amid speculation it would lead to bigger economic reforms.
Analysts at BofA were optimistic about the prospects, noting that India’s workforce won’t peak until 2048, while it has already peaked in developed markets and China.
“We expect India to be the second largest global growth engine for the remainder of the decade and the only major equity market outside the US to have consistently contributed,” they said.
In Mexico, the ruling party declared Claudia Sheinbaum the winner of the presidential election by a “large margin” after polling stations closed on Sunday.
The main focus of the week will be on interest rates, with the European Central Bank considered almost certain to fall by a quarter of a percentage point to 3.75% on Thursday, the first time they would have eased ahead of the US Federal Reserve.
Markets also imply about an 80% chance that the Bank of Canada will make cuts at its meeting on Wednesday and an easing of 59 basis points this year, although analysts hope the easing will be even deeper.
Key developments that could impact the markets on Monday:
– Latest May PMIs for the EU, Germany, France and the UK
– US ISM manufacturing index, S&P Global US manufacturing PMI, construction spending for April
(by Wayne Cole; editing by Christopher Cushing)
