European Stocks Dip With US Futures Ahead of ECB: Markets Wrap

European stocks turned lower with US equity futures on persisting worries about high inflation and slowing growth.

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(Bloomberg) — European stocks turned lower with US equity futures on persisting worries about high inflation and slowing growth. 

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The Stoxx Europe 600 Index erased an early gain to trade 0.2% lower. S&P 500 and Nasdaq 100 futures slipped 0.4%. Government bonds fell across Europe as traders braced for a crucial European Central Bank meeting. Treasury yields edged up, taking the benchmark 10-year rate back to 3%.

An Asia-Pacific share gauge rose about 1% and Hong Kong’s Hang Seng Tech Index advanced after new video game approvals encouraged the view that China is loosening a crackdown on internet firms. 

Sentiment remains fragile on concerns that interest rates will need to go higher to rein in inflation, stifling economic growth in the process. Later in the week, focus will turn to the US consumer price index reading for for clues on the Federal Reserve rate path following the central bank’s outsized hike on May 4. On Thursday the ECB is set to end trillions of euros of asset purchases.

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The ECB has come under huge pressure to rein in record inflation at more than four times the central bank’s target of 2%, and money markets are wagering that a historic half-point increase in July is almost a coin toss. Such a super-size increase would follow similar moves by the Fed, Bank of Canada and Reserve Bank of Australia.

Read more: Half-Point European Central Bank Rate Hike by July Is Coin Toss

At the same time, policy makers will be mindful to not derail economic recoveries, and traders are looking ahead to the peak of this hiking cycle — and the reverse back to easy policy. Billionaire hedge fund founder Ray Dalio said central banks across the globe will be required to cut interest rates in 2024 after a period of stagflation constrains their economies.

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“When you look at the global growth backdrop, it’s certainly slowing and it’s slowing from very high levels and it’s going to feel uncomfortable,” Erin Browne, Pacific Investment Management Co. multi-asset strategies portfolio manager, said on Bloomberg Radio. 

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Key events to watch this week:

  • OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday
  • European Central Bank rate decision, Christine Lagarde briefing, Thursday
  • China trade, new yuan loans, money supply, aggregate financing. Thursday
  • US CPI, University of Michigan consumer sentiment Friday
  • China CPI, PPI Friday



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