Investors hold their breath over inflation data

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

The wait time is almost over as inflation reports from Europe and the United States top the day’s agenda, with any sort of surprise likely to sway markets as Investors are weighing changing expectations for global rates.

The first will be eurozone inflation, which is expected to settle at 2.5% in May after remaining stable over the past two months at 2.4%, while core inflation is expected to be stable at 2.7%, according to a Reuters study. survey.

Investors will analyze the data to gauge the path the European Central Bank is likely to follow on rates. Although a June rate cut is almost certain, the focus is on what comes next.

Thus, investors are likely to be extremely sensitive to even a slight deviation or failure.

Markets are pricing in cuts of 60 basis points from the ECB this year, but much will depend on inflation figures and wage growth over the coming months.

Futures indicate European stock markets are set for a lackluster opening, with the pan-European STOXX 600 index hitting its lowest level in more than three weeks on Thursday, but on track for a 2% gain for the month.

A downward revision to U.S. GDP on Thursday fueled expectations that the Federal Reserve would have room to cut rates this year, even as investors, for a change, took the bad news (of weaker growth ) as bad news, sending US stocks, the dollar and Treasury yields lower. .

Markets are pricing in a 35 basis point cut from the Fed this year, with a 50% chance of cutting rates in September.

Ever-changing expectations for US rates have taken a toll on the dollar, which is expected to see its first monthly loss this year against the euro, pound sterling, aussie, kiwi and even the yen, although the gain The yen’s slight decline may be the result of the suspected intervention earlier this month.

During Asian hours, stocks broadly rose, while the dollar rallied. Chinese stocks rose even as data showed the country’s manufacturing activity fell unexpectedly in May, according to an official factory survey.

Meanwhile, markets have so far shrugged off Donald Trump’s verdict after he on Thursday became the first US president to be convicted of a crime when a New York jury found him guilty of tampering of documents to hide a payment intended to silence a porn star before the 2016 election.

Shares of Trump Media & Technology Group, parent company of The Truth Social, majority owned by Trump, fell 6.5% Thursday evening after the verdict.

Main developments that could influence the markets on Friday:

Economic Events: May inflation report for Eurozone and France, April retail sales data for Germany

The story continues

(This story has been refiled to correct the grammar of the word “title” in paragraph 2 and the spelling of the word “Reserve” in paragraph 8)

(Edited by Muralikumar Anantharaman)