Ankur Banerjee offers a glimpse into the day’s expectations for European and global markets.
Despite the initial enthusiasm brought about by Nvidia’s robust results, the fear of prolonged high interest rates has once again overshadowed the AI rally.
Investors are wary due to the forthcoming April retail sales data for the UK and detailed Germany GDP figures, causing stocks to falter and the dollar to strengthen.
Forecasts suggest a sluggish start for Europe with the STOXX 600 index potentially experiencing nearly a 1% weekly fall, the largest since mid-April. The unexpected announcement of a general election by UK Prime Minister Rishi Sunak puts the spotlight on the UK’s blue-chip stock index.
Simultaneously, the Bank of England has to deal with UK inflation that didn’t slow down as much as anticipated in April. The market is predicting a 30 basis point cut this year, with the most likely time for the BOE to start rate cuts being their September meeting. However, an August cut, post-election, is also not being ruled out.
On the other hand, traders are predicting a 58 basis point cut from the European Central Bank in 2024, a decrease from the 67 basis point prediction at the beginning of the week, following key wage data.
While the ECB has traditionally based rate cut prospects on this crucial wage statistic, they’ve now essentially confirmed a policy easing for June 6. Hence, the recent figure will likely impact policy decisions later this year.
In relation to the Federal Reserve, markets are now certain of a rate cut only in December, factoring in 36 basis points of easing following strong economic data. This is a significant shift from January when markets had anticipated as much as a 150 basis point easing this year.
In terms of business news, attention is drawn to Hargreaves Lansdown after Reuters revealed that the company’s major shareholder, Peter Hargreaves, is considering privatizing the company.
Key events that could affect markets on Friday:
Economic events: Germany Q1 GDP, UK April retail sales, Sweden April PPI
(By Ankur Banerjee. Edited by Sam Holmes)
