A look at the day ahead in European and global markets by Ankur Banerjee
Investors have retreated into the Asian hours as stocks drift lower as the dollar holds on to overnight gains. The prevailing fearful sentiment is likely to persist as we head into the crucial next few weeks of central bank meetings.
A Reuters poll of economists showed the Fed is expected to deliver a final 25 basis point rate hike in May and then hold rates steady for the rest of the year. Markets are anticipating this increase as well, but anticipate some cuts towards the end of 2023.
The Bank of England, on the other hand, is likely to remain on its hawkish stance as data over the week showed that UK inflation remained elevated. The UK was the only country in western Europe with double-digit inflation in March, after a more modest-than-expected decline, according to data released on Wednesday.
Investors are now fully pricing in a quarter point rate hike to 4.25% on May 11th at the next BoE meeting and expect rates to peak at 5% by September according to futures markets.
Diverse strategies on opposite sides of the Atlantic have recently propelled sterling and the euro to multi-month highs and investor attention will likely be focused on where European currencies head next.
Meanwhile, New Zealand consumer inflation came in below expectations in the first quarter but remained near historic highs, fueling bets of another rate hike in May.
Australia’s central bank will have a new monetary policy management committee, chaired by the governor but with independent expert members with more power over interest rate setting.
Elsewhere, shares of Tesla slipped after the electric vehicle maker reported its lowest quarterly gross margin in two years and missed estimates. Elon Musk doubled down on the price war he started late last year, saying Tesla would prioritize sales growth over profit in a weak economy.
(Graphic: Tesla Earnings image – http://fingfx.thomsonreuters.com/gfx/rngs/TESLA-RESULTS/010010144FX/tesla.jpg)
The story goes on
(Chart: Rates and Inflation Rates and Inflation – https://www.reuters.com/graphics/USA-FED/INFLATION/gkvlgnaywpb/chart.png)
Key developments that could impact markets on Thursday:
Economic Events: Germany March PPI, Eurozone April Consumer Confidence, France April Manufacturing Confidence
(Reporting by Ankur Banerjee in Singapore; Editing by Edmund Klamann)
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