U.K. Inflation Surprise Seen Lifting European Markets

Markets in Europe are expected to open on a firm note on Wednesday amidst expectations of a softening in the monetary policy outlook. The more-than-expected decline in inflation in the U.K. is expected to drive the positive sentiment. Caution amidst the U.S. dollar’s resilience is however expected to keep sentiment in check.

Data released just a while ago by U.K.’s Office for National Statistics showed headline inflation falling to 7.9 percent in June, from 8.7 percent in the previous month and expectations of a decline to 8.2 percent. Core inflation, which was expected to be steady at 7.1 percent dropped more than expected to 6.9 percent. Producer price inflation in the U.K. also touched levels last seen in December 2020.

Wall Street had closed on a positive note on Tuesday, buoyed by better-than-expected earnings updates from top lenders. The Nasdaq Composite added 0.76 percent to close at 14,353.64 whereas the Dow Jones Industrial Average added 1.06 percent to finish trading at 34,951.93.

Sentiment was upbeat at the European bourses as well and major markets in the region closed on a positive note on Tuesday. Dovish comments from an ECB official also supported the rally. Switzerland’s SMI rallied 1.2 percent. U.K.’s FTSE 100 finished 0.64 percent higher. France’s CAC 40 gained 0.38 percent. Germany’s DAX added 0.35 percent. The pan-European Stoxx-50 rose 0.30 percent.

Current indications from the European stock futures indicate a positive sentiment. The FTSE 100 Futures (Sep) is trading 0.63 percent higher. The DAX Futures (Sep) is currently trading 0.27 percent higher. The CAC 40 Futures (Aug) traded 0.49 percent higher. The pan-European Stoxx 50 Futures (Sep) has moved 0.59 percent higher. The SMI Futures (Sep) has added 0.01 percent.

American stock futures are trading in mildly positive territory. The US 30 (DJIA) is up 0.07 percent whereas the US500 (S&P 500) is trading 0.01 percent higher.

Asian stock markets are trading on a mixed note. Japan’s Nikkei 225 is trading 0.8 percent higher. Australia’s S&P ASX 200 has gained 0.45 percent. New Zealand’s NZX 50 has added 0.12 percent. India’s Nifty 50 has also edged higher. South Korea’s KOSPI has shed 0.18 percent. Hong Kong’s Hang Seng plunged more than 1 percent whereas China’s Shanghai Composite has shed 0.41 percent. 

Less-than-expected Retail Sales data from the U.S. strengthened the dollar, lifting the Dollar Index (DXY), a measure of the U.S. dollar’s strength relative to six currencies, 0.13 percent to 100.08. The EUR/USD pair has decreased 0.03 percent to 1.1223 whereas the GBP/USD pair has shed 0.11 percent to trade at 1.3020.

Amidst the dollar’s strength, gold prices weakened. Gold Futures for August settlement are trading at $1,978.55 per troy ounce, down 0.11 percent on an overnight basis.

Crude prices declined amidst data from the American Petroleum Institute that showed a lower-than-expected decline in inventories in the U.S. Brent Crude Futures for September settlement decreased 0.29 percent to $79.40 whereas WTI Crude Futures for September settlement decreased 0.40 percent to $75.36.

Due for release on Wednesday is the inflation (final) reading for June from Euro Area, which is seen falling to 5.5 percent, from 6.1 percent in the previous month.

Major earnings updates due on Wednesday from the region include Volvo, ASSA ABLOY, Sandvik, ASML Holding, Svenska Hendelsbanken, IBM, SKF, Trelleborg, AAK, Hexpol, Thule Group and Ratos

Source: https://www.rttnews.com/3376516/u-k-inflation-surprise-seen-lifting-european-markets.aspx?refresh=1