A look at the day ahead in European and global markets from Rae Wee
The Bank of England announces its interest rate decision on Thursday, where what had once seemed like a straightforward hold is now under intense scrutiny.
Markets are pricing in an almost one-in-three chance of a cut to 3.75%, up from a one-in-10 possibility a month ago.
At 3.8%, Britain’s inflation rate remains the highest among the Group of Seven major advanced economies, but a steady reading and a cooling labour market have offered tentative signs that inflationary pressures are abating.
More crucially, it’s the likelihood of further belt-tightening in the nation’s upcoming budget that could provide an added impetus for policymakers to lower rates on Thursday.
British finance minister Rachel Reeves earlier this week paved the way for broad tax rises to avoid a return to “austerity”, framing her second annual budget as one of “hard choices” to protect public spending while reducing Britain’s debt.
Reeves’ rare pre-budget speech left some analysts puzzled over the timing, though they generally expect the upcoming budget to be disinflationary.
ASIAN SHARES BOUNCE BACK
Investors will also get a clutch of earnings from European companies later in the day, with AstraZeneca and Deutsche Post among those set to report results.
The outlook for European corporate health has substantially improved, the latest earnings forecasts showed, as investors’ worst fears for quarterly earnings failed to materialise.
Elsewhere in markets, Asia shares were upbeat, reversing their steep losses from the previous session after better-than-expected U.S. economic data drew investors back into indexes trading near record highs.
Fears of inflated technology stock valuations seem to have abated for now, with investors seeing little cause for panic after Wednesday’s sharp selloff.
In Hong Kong, Pony Ai and WeRide stocks dropped as the Chinese autonomous driving developers started trading, after raising nearly $1.2 billion in share offerings.
A host of Federal Reserve officials are also due to speak later on Thursday, which could offer some clues on the U.S. rate outlook.
Resilience in the world’s largest economy has led traders to pare back bets of a Fed cut in December, with markets now pricing in a 61% chance of a 25-basis-point cut, down from about 70% earlier in the week.
And on the tariffs front, U.S. Supreme Court justices on Wednesday raised doubts over the legality of President Donald Trump’s sweeping tariffs, in a case with implications for the global economy that marks a major test of Trump’s powers.
Key developments that could influence markets on Thursday:
– Bank of England rate decision
– AstraZeneca, Deutsche Post, Henkel, Sainsbury earnings
– Fed’s Barr, Williams, Hammack, Waller, Paulson, Musalem speak
(Reporting by Rae Wee; Editing by Saad Sayeed)
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