European stocks steady as traders assess rate trajectory: Markets fall

(Bloomberg) — European stocks struggled for traction in weak trading after a European Central Bank official warned that policy will have to remain restrictive throughout the year.

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The Stoxx Europe 600 index was little changed. Trading volume was less than half the 20-day average for that time of day, with UK and US markets closed for holidays. US stock futures and the dollar remained stable.

The European Central Bank is on track to start cutting interest rates next month, but will have to keep policy in restrictive territory until 2024, chief economist Philip Lane told the Financial Times. In a speech on Monday, he added that the ECB “will continue to follow a data-dependent and meeting-by-meeting approach” in determining the appropriate level for interest rates.

A rate cut in June was widely telegraphed, but subsequent measures are less clear given uncertainty over wage growth and factors such as fighting in the Middle East. This week’s data may show that overall inflation in the eurozone rose in May. Markets are rethinking the three reductions they bet on in 2024 last week. They now cost just two.

“European inflation is back,” although the May spike may be temporary, Credit Agricole SA strategists led by Jean-François Paren wrote in a note. “This does not call into question the June cut, but it does increase the risk of devaluation of additional cuts later.”

Among individual investors in Europe, EFG International AG rose 4.6% following a report from Bloomberg after the market closed on Friday that Julius Baer Group Ltd. Julius Baer fell 0.8%.

The MSCI Asia Pacific index posted its biggest gain since May 16, led by stock gauges in Hong Kong, China and Japan.

A range of inflation prints from Australia to Japan, the eurozone and the US will be released this week as traders make delicate bets on the outlook for monetary policy. The Federal Reserve’s favorite underlying inflation measure will be released on Friday and is expected to show modest relief. Fed Chairman Jerome Powell emphasized the need for more evidence that inflation is on track for the 2% target before easing policy.

John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers speaking this week.

The story continues

Read more: About the ‘T+1’ Rule That Causes US Stocks to Liquidate in One Day: QuickTake

Cash Treasury bond trading has ceased. The “T+1” rule, which has the potential to cause problems for foreign investors, will come into effect when investors return from the long weekend – causing US stocks to be liquidated in one day instead of two.

Meanwhile, gold rose, while iron ore and copper futures fell. Oil remained little changed after its biggest weekly loss in four, with the focus on an OPEC+ supply meeting on Sunday and U.S. demand at the start of the summer season.

Some important events this week:

• ECB’s Philip Lane speaks in Dublin on inflation, Monday

• The IMF holds discussions with Ukrainian authorities to review economic policies as the country seeks to unlock the next tranche of $2.2 billion in aid, Monday

• Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and Governing Council Member Klaas Knot speak at the Barclays-CEPR International Monetary Policy Forum, Tuesday

• South African elections, the most significant since the end of apartheid, Wednesday

• Fed releases Beige Book economic survey, Wednesday

• South African Rate Decision, US Initial Jobless Claims, GDP, Wholesale Inventories, Thursday

• New York Fed President John Williams speaks at the New York Economic Club, Thursday

• GDP data published for Canada, Eurozone, Turkey, Friday

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were little changed as of 8:46 a.m. New York time

• Nasdaq 100 futures remained unchanged

• Futures on the Dow Jones Industrial Average were little changed

• The Stoxx Europe 600 rose 0.1%

• The MSCI World index rose 0.1%

Coins

• The Bloomberg Dollar Spot index was little changed

• The euro was little changed at $1.0849

• The British pound rose 0.1% to $1.2753

• The Japanese yen was little changed at 156.84 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $68,544.04

• Ether rose 1% to $3,898.85

Titles

• The 10-year Treasury yield fell one basis point to 4.46%

• Germany’s 10-year yield fell four basis points to 2.54%

• Britain’s 10-year yield little changed at 4.26%

goods

• West Texas Intermediate crude rose 0.8% to $78.32 a barrel

• Spot gold rose 0.6% to $2,347.84 an ounce

This story was produced with help from Bloomberg Automation.

–With assistance from Matthew Burgess, Catherine Bosley and Michael Msika.

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