Ankur Banerjee previews the day’s trading in the European and international markets.
Investors are attempting a small risk-on rally to end a brutal third quarter as the surge in Treasury yields and oil prices slows, but sentiment is still being governed by concerns about steadily rising interest rates.
A falling dollar and rising Asian markets greet Europe in the morning. Despite a little decline, oil prices remained on track for a 2% weekly rise. Investors in Europe are awaiting a wealth of economic data, with the euro zone’s September inflation report taking center stage.
According to economists surveyed by Reuters, the inflation rate in the 20 nations that use the euro is predicted to drop from 5.2% in August to 4.5% in September. The publication of the report follows data on Thursday that revealed German inflation dropped in September to its lowest level since Russia’s invasion of Ukraine.
The European Central Bank is closely monitoring euro zone inflation data since it will determine the direction of interest rates in the area and whether the bank would adopt a more accommodating approach.
The euro area’s benchmark Bund yield reached a new 12-year high on Thursday as the German data on Thursday failed to change traders’ opinions that the ECB will maintain its hawkish policy.
The yield on 10-year Treasury notes was 4.597% on Friday, moving away from the new 16-year peak of 4.688% it reached on Thursday. In the meantime, Treasury yields took a little break. However, the note’s yield has increased by 50 basis points this month.
Futures suggest that European markets will open higher, but it remains to be seen if they can maintain the gains.
Despite ending a five-day losing run on Thursday, the pan-European STOXX 600 index is still on track to post its first quarterly loss in four quarters with a 3% dip from July to September.
The three-quarter winning streak for both the euro and pound will end with losses for the months of July through September.
Later on Friday, investors will turn their focus to the US personal consumption expenditures price index for the most recent assessment of inflation.
In the meanwhile, two people with direct knowledge of the situation told Reuters that Nio had held preliminary discussions with Mercedes-Benz for a partnership in which the German manufacturer would invest in the Chinese electric vehicle company in exchange for technology.
Important events that may have an impact on markets on Friday:
Economic events: UK Q2 GDP, September inflation rates for the eurozone and France, September unemployment rates in Germany, and retail sales statistics