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03/06/24
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Stocks In Europe Rally Ahead of ECB Rate Move
On Monday, stocks in Europe bounced and government bond yields fell as investors awaited an interest rate cut by the European Central Bank, while the focus was solidly on inflation with U.S. jobs data due this week.
The STOXX pan-European index was 0.4% higher while U.S. stock futures also gained.
The focus was on the ECB which will likely on Thursday cut rates by 0.25% to 3.75%.
However, last week’s unexpectedly high reading for eurozone inflation further weakened the case for a fast round of cuts. Markets are currently pricing in less than 60 basis points of easing.
Data on Monday showed that factory activity in China in May grew at the fastest pace in around two years. That increased the prevailing optimism in markets after figures on Friday showed the U.S. Federal Reserve’s preferred gauge of inflation in April was steady.
Markets also expect an around 80% probability the Bank of Canada will trim rates at its Wednesday meeting and around 0.6% of easing this year, although analysts hope the easing will be deeper.
The outlook may change this week with data due including Monday’s key survey on manufacturing, Wednesday’s services surveys, and Friday’s May payrolls report in which unemployment is expected to hold at 3.9%.
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