Stella Qiu looks forward to the day ahead for European and global markets
Asian stocks rose broadly as investors renewed their love for technology stocks, particularly Nvidia , and remained concerned about the European Central Bank’s almost certain interest rate cut and what lies ahead.
All of this should help mitigate the negative impact on markets from the rapidly fading prospect of a sharp half-basis point interest rate cut by the Federal Reserve next week.
The much-awaited US inflation report showed that the core CPI rose by 0.28% in August, slightly higher than the expected 0.2% increase, which is enough for the volatile market to ultimately decide whether the Federal Reserve will be ready to raise interest rates by 25 basis points on Wednesday.
This pushed up short-term yields and gave a much-needed boost to the dollar against the yen , which has fallen from its 2024 high of $140.71.
The Nikkei rose nearly 3% as a weaker yen helped offset hawkish comments from a top Bank of Japan official that interest rates would need to reach 1% over time.
The biggest risk event in Europe today: continued growth is possible after the European Central Bank’s policy decision. Eurostoxx 50 futures rose 1.2% and FTSE futures rose 1%.
A quarter-percentage-point rate cut is almost certain, but the question is whether the central bank will cut rates again in October and December. Inflation hawks are still in the majority, and the market estimates that the inflation rate will be only 40% next month.
ECB President Christine Lagarde is likely to stick to her recent statement in the post-meeting briefing that decisions will be taken on a meeting-by-meeting basis depending on the data received.
After that, attention will once again turn to the United States, which is due to publish weekly unemployment claims and producer price data.
Initial jobless claims become more important as the Fed focuses on the health of the labor market. A lower-than-expected number of 230,000 could revive the possibility of a 50 basis point rate cut.
Economists had expected the PPI to rise 0.1% last month. Some elements of the data will help analysts refine their forecasts for the personal consumption expenditures price index, the Fed’s preferred inflation gauge, due out on Sept. 27.
Key developments that will impact the markets on Thursday:
– European Central Bank policy meeting, followed by President Christine Lagarde’s briefing.
——U.S. Weekly Jobless Claims
——U.S. producer price index
