ECB’s Inflation Challenger: Rate Cut or Hold?

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European Stocks Soar Amid ECB Rate Cut Anticipation

European Central Bank President Christine Lagarde speaks during a press conference in Frankfurt, Germany

ECB Rate Cut Looms

European stock markets kicked off Wednesday on an upbeat note, propelled by investor optimism ahead of the upcoming European Central Bank (ECB) meeting. The pan-European Stoxx 600 index surged 0.5% at the open, with every sector and major bourse in the green.

The most notable gains were registered by retail stocks, which jumped 1.8%. Zara-owner Inditex led the benchmark’s upward trajectory, climbing 4.5% after reporting a robust 7% sales growth in the first quarter. The company’s sales reached €8.2 billion (.9 billion) in the three-month period ending in April, broadly in line with market expectations.

Euro Zone Inflation Data in Focus

Investors eagerly await the release of Spanish clothing retailer Inditex’s earnings report. On the macroeconomic front, the euro zone’s final Purchasing Managers’ Index (PMI) data for May, which gauges manufacturing and services activity, is scheduled for release.

Attention, however, will be laser-focused on the ECB’s impending decision on Thursday. The central bank is widely anticipated to slash interest rates for the first time since 2019. However, the recent higher-than-expected euro zone inflation print released last Friday may influence the ECB’s deliberations.

Asia-Pacific Markets Mixed

Moving eastward, Asia-Pacific markets exhibited a mixed performance overnight. Investors digested the outcome of India’s election results, where Prime Minister Narendra Modi’s Bharatiya Janata Party fell short of securing an outright majority in parliament’s lower house.

Despite this, Modi is poised to lead for a third consecutive term after the BJP-led National Democratic Alliance captured 294 seats, surpassing the 272 required to form a government.

US Stocks Steady

In the United States, stock futures remained largely flat on Tuesday evening. Investors awaited the release of private payroll data, with economists predicting that private employers added approximately 175,000 jobs in May, according to a Dow Jones poll.

Data sourced from: cnbc.com