LONDON (AFP) – European stock markets rebounded slightly and leading Asian indices closed mixed yesterday, as attention turned to upcoming United States (US) inflation data and the Federal Reserve’s (Fed) interest-rate decision.
The dollar traded mixed versus main rivals, with the euro steadier following heavy falls on political uncertainty in Europe fuelled by shock European Union election results at the weekend.
“Today marks the peak of the week for potential market volatility, with the US CPI inflation gauge providing the precursor to the… US interest rate decision,” noted chief market analyst at Scope Markets Joshua Mahony.
While a surge in Apple’s share price helped Wall Street reach another record high on Tuesday, investors are growing increasingly nervous that the US central bank will hold off on cutting borrowing costs for an extended period as officials determine if prices have been brought under control.
Forecasts for the number of reductions the Fed will make in 2024 have been whittled down from six at the start of the year to just three at best now, following a string of figures indicating the US labour market remains solid and the economy is still in rude health. The bank is widely expected to stand pat on rates but its “dot plot” guidance, which shows officials’ outlook for rates this year, is the main event.
There was little reaction to data showing Chinese consumer prices rose slightly less than expected last month.
Markets continued to track events in France, whose President Emmanuel Macron called snap elections in reaction to his centrist party’s rout by the far right in EU-wide polls.
The weekend’s result was echoed across the bloc, sparking worries about unity at a time when it faces huge economic and security risks.
Macron’s decision led ratings agency Moody’s to warn it could lower France’s credit score because it raises the risk of “political instability”.
Euro weakness following the election results mirrored a steep drop in European equities, with Paris losing more than one percent on each of the past two days.
But major eurozone indices Paris and Frankfurt rebounded slightly yesterday, while London recovered following data showing the United Kingdom (UK) economy stagnated in April.
While growth stalled, analysts said it could put pressure on the Bank of England to cut interest rates soon after next month’s UK general election.
