Markets pause ahead of key economic events
European equity markets opened mixed on Wednesday as investors awaited the release of the eurozone’s latest inflation figures and a closely watched panel discussion featuring some of the world’s leading central bankers, including newly appointed Federal Reserve Chair Kevin Warsh.
The pan-European STOXX 600 slipped 0.2% in early trading after reaching a record high on Tuesday. Germany’s DAX gained 0.2%, while France’s CAC 40 fell 0.3% and London’s FTSE 100 declined 0.2%. Spain’s IBEX 35 and Italy’s FTSE MIB both traded 0.3% lower.
Inflation data expected to influence policy outlook
Markets are focused on the eurozone’s preliminary inflation reading for June, with economists expecting annual headline inflation to slow to 3.0% from 3.2% in May.
Investors will assess whether price pressures are continuing to ease following the European Central Bank’s recent interest rate increases, introduced in response to the sharp rise in energy prices triggered by the outbreak of the US-Iran conflict.
Although crude oil prices have largely returned to levels seen before the conflict and shipping traffic through the Strait of Hormuz has improved, geopolitical developments remain a source of uncertainty.
Reports from the Wall Street Journal suggested that US President Donald Trump recently considered resuming large-scale military action against Iran before deciding to continue diplomatic negotiations. Representatives from both countries are expected to participate in mediated talks in Doha.
Sintra forum takes centre stage
Attention will also turn to the ECB Forum on Central Banking in Sintra, Portugal, where senior policymakers from the world’s leading central banks are due to discuss the global economic outlook.
The event will feature the first international appearance by Federal Reserve Chair Kevin Warsh since succeeding Jerome Powell in May.
Investors look for clues on future interest rates
Markets will closely examine Warsh’s remarks for further insight into the direction of US monetary policy.
Although he was appointed by President Trump, who has repeatedly argued in favour of lower interest rates, Warsh has recently adopted a more hawkish tone, warning about the risk of persistent structural inflation.
Investors will also analyse comments from European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem for indications of when major central banks may begin easing monetary policy as the impact of the energy crisis continues to fade.
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