European shares rise ahead of inflation data, central bank meetings

  • European shares rise ahead of US CPI
  • The Fed was expected to skip raising interest rates this week
  • Oil falls more than 2% on China concerns

LONDON, June 12 (Reuters) – European stocks rose in early trade on Monday and world shares were just below 13-month highs ahead of key inflation data and meetings of the U.S. Federal Reserve and the European Central Bank later in the week.

After a lack of direction during Asian trade, market sentiment picked up in early European trade as investors awaited US CPI data due on Tuesday.

At 0845 GMT, the MSCI World Equity index was up 0.2% on the day (.MIWD00000PUS), staying just below a 13-month high, while MSCI’s Europe index was up 0.8% (.MSER).

Europe’s STOXX 600 was up 0.5% (.STOXX) and London’s FTSE 100 was up 0.3% (.FTSE).

“Inflation is really moving in the right direction in Europe and everyone hopes that this will be confirmed in the US tomorrow as well,” said Samy Chaar, chief economist at Lombard Odier, describing markets as being in “wait-and-see mode”. .”

“Obviously if we have a big negative surprise on inflation and inflation comes in much hotter than expected, that will challenge the central banks and the Fed in their ‘pause’ strategy,” he said.

Investors expect the Fed to keep interest rates steady when the two-day meeting ends on Wednesday, but surprise rate hikes by the Reserve Bank of Australia and the Bank of Canada last week raised the possibility that central banks will extend their tightening cycles.

Money markets are pricing in a 73.6% chance of the Fed keeping rates steady, and a 26.4% chance of a 25 basis point rate hike, according to the CME FedWatch tool.

The US dollar index was down 0.2% on the day, at 103.310.

The euro rose 0.2% to $1.0775. The European Central Bank is expected to raise interest rates by 25 basis points on Thursday.

Eurozone government bond yields struggled to find direction, hovering near recent highs. The German benchmark 10-year yield rose by less than one basis point, to 2.385%.

Germany’s two-year government bond yield, which is sensitive to interest rate expectations, was little changed at 2.974%.

The Bank of Japan is due to deliver its interest rate decision on Friday and is expected to maintain its ultra-loose policy. Japan’s wholesale inflation eased for a fifth straight month in May, data showed.

China’s weak economic recovery after COVID continued to weigh on sentiment, and Chinese and Hong Kong stocks fell.

Investors are focusing on the speed with which the People’s Bank of China (PBOC) will roll over a 200 billion yuan ($28.00 billion) tranche of medium-term policy loans, due on Thursday.

A cut, possible given China’s post-pandemic recovery has begun to sputter, would widen the gap between US and Chinese prices and could weigh on the yuan.

Oil prices fell, as concerns about lower fuel demand from China and rising Russian crude supplies weighed on the market.

Brent crude futures fell 2.2% to $73.16 a barrel, and US West Texas Intermediate (WTI) crude was at $68.41, down 2.5%.

Reporting by Elizabeth Howcroft; Editing by Sharon Singleton

Our standards: Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money that powers ‘Web3’.

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