🎁 💸 Warren Buffett's Top Picks Are Up +49.1%. Copy Them to Your Watchlist – For FreeCopy Portfolio

Morning Bid: Markets ponders rate path, shares listless

Published 05/17/2024, 12:32 AM
Updated 05/17/2024, 12:36 AM
© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 8, 2024. REUTERS/Staff/File Photo
EUR/USD
-
WMT
-
HSBC
-
STOXX
-

A look at the day ahead in European and global markets from Ankur Banerjee

The cold harsh reality of the Federal Reserve likely keeping interest rates higher for longer to combat inflation has put a lid on the post-U.S. CPI exuberance, with the listless mood set to continue at European bourses.

The final euro zone inflation reading for April headlines economic data on Friday and traders will hope the report will cement what has been known for a while: A rate cut from the European Central Bank (ECB) is on the way in June.

But what comes after that is less clear.

ECB board member Isabel Schnabel said the central bank may lower rates in June, but should be cautious about further cuts in borrowing costs given uncertainty over the outlook, Japan's Nikkei newspaper reported.

Traders have priced in 70 basis points of ECB cuts this year - a lot more than the 46 bps of easing priced in for the Fed.

Data this week showed a cooling U.S. consumer price index (CPI), prompting market participants to swiftly price in at least two rate cuts this year. However, Fed officials saying rates may need to stay higher for longer and a report showing a tight labour market have led to another shift in expectations.

Markets are now fully pricing in one cut in November, with 68% chance of a cut in September - so we are roughly back where we were before the CPI data in terms of U.S. rate expectations.

Across the pond, the pan-European STOXX 600 will aim to get back on track after snapping a nine-day winning streak on Thursday. The index is poised for a second week of gain.

The euro will also aim to close out its strongest week against the U.S. dollar in two-and-half months and the euro zone inflation reading might give it a lift.

In company news, market focus will be on HSBC after Bloomberg reported the lender's largest shareholder, Ping An Insurance Group of China, is considering options to reduce its 8% stake.

The insurer has been offloading shares in the London-headquartered banking group.

Elsewhere, a positive forecast from retail bellwether Walmart (NYSE:WMT) on Thursday signalled a resilient U.S. shopper.

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, April 8, 2024. REUTERS/Staff/File Photo

Key developments that could influence markets on Friday:

Economic events: Euro zone April inflation data

(By Ankur Banerjee; Editing by Christopher Cushing)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.