European equities moved slightly higher in early trading on Thursday as investors awaited the European Central Bank’s interest-rate decision later in the day.
The pan-European STOXX 600 gained 0.1%, following a 1.4% decline on Wednesday that left the index at its lowest closing level since late July.
Markets in Frankfurt, Paris and London were little changed as investors monitored monetary policy expectations alongside higher energy prices. Brent crude remained above $100 a barrel.
Markets Price In 25-Basis-Point ECB Rate Increase
Money markets had almost fully priced in a 25-basis-point interest-rate increase from the ECB, which would take its deposit facility rate to 2.50%.
Expectations have changed from several weeks earlier, when markets largely anticipated that the central bank would leave rates unchanged.
The change has coincided with higher oil prices following military developments in the Middle East, including attacks involving oil tankers and regional infrastructure in the Persian Gulf.
Higher energy prices can increase costs for European manufacturers, transport operators and consumers, adding to inflationary pressures.
Preliminary Eurostat data showed annual Eurozone inflation rising to 3.3%, with energy prices increasing 14.3%.
Investors Await ECB Economic Projections
Eurozone inflation remains above the ECB’s 2% target, with investors awaiting comments from ECB President Christine Lagarde following Thursday’s policy announcement.
With a 25-basis-point increase largely reflected in market pricing, attention is also focused on the ECB’s updated staff macroeconomic projections, including its inflation forecasts for 2027.
The projections and Lagarde’s press conference could provide further information about how policymakers assess the outlook for interest rates. The ECB had not announced its decision at the time covered by the supplied information.
U.S. Inflation Data Due Friday
Investors are also awaiting Friday’s U.S. Consumer Price Index report.
The inflation figures will be the final major U.S. economic data release cited in the supplied information ahead of the Federal Reserve’s policy meeting on 15-16 September.
The data could affect market expectations for U.S. monetary policy, although the outcome of the Federal Reserve meeting remains subject to policymakers’ decision.
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