Morning Bid: Biding time before the data dump

By Thomson Reuters May 29, 2024 | 11:32 PM

A look at the day ahead in European and global markets from Rae Wee

The lack of fresh market moving catalysts on Thursday meant that the higher-for-longer rates narrative was here to stay, at least until the next run of economic readings prove otherwise.

It seems unlikely, though, that the highly anticipated data dump at the end of the week – from euro zone inflation to the U.S. PCE report – will significantly alter the outlook for global monetary policy, especially since inflation across major economies continues to blow hot and cold.

With consumer prices in Germany rising more than forecast, that puts even more focus on the wider bloc’s reading on Friday, which will come ahead of the European Central Bank’s (ECB) expected rate cut next week.

And though a June cut is pretty much a done deal, the lack of clarity from ECB policymakers over how far and fast rates will be lowered thereafter is keeping markets nervous.

Still, ahead of Friday’s top-tier releases, investors will first have to navigate through Thursday, and market waters are getting increasingly choppy.

European shares are in for a rough start after its Asian counterparts were left in a sea of red, with rising global bond yields also denting risk sentiment.

The two-year U.S. Treasury yield flirted with the 5% level on Thursday while the 10-year yield also stayed near its strongest level in weeks.

U.S. yield spreads over other jurisdictions may not be widening much in the dollar’s favour, but they are staying wide enough to ensure the dollar remains investors’ currency of choice.

Elsewhere in companies news, BHP Group investors welcomed the top global miner’s decision to walk away from a $49 billion plan to take over Anglo American, which rejected three proposed offers from its bigger rival over the past six weeks.

While BHP’s Australia-listed shares fell nearly 2% on Thursday, they were in line with its peers.

Key developments that could influence markets on Thursday:

– Euro zone unemployment rate (April)

– Euro zone business climate (May)

– Euro zone economic sentiment (May)

– Euro zone industrial sentiment (May)

– Euro zone services sentiment (May)

(Editing by Muralikumar Anantharaman)