LONDON, – European stocks declined on Thursday as traders exhibited caution ahead of crucial inflation data. Markets were also attentive to potential intervention by Japanese authorities to stabilize the yen, following its recent declines.
Investor concerns over inflation heightened after unexpected jumps in inflation data from Australia on Wednesday and Canada on Tuesday. Additionally, falling semiconductor stocks impacted equity markets, with disappointment stemming from chipmaker Micron Technology’s revenue forecast.
As of 1138 GMT, the MSCI World Equity index was down 0.1%, while the pan-European STOXX 600 dipped 0.2%, steadying slightly after two consecutive days of losses. London’s FTSE 100 dropped 0.3%, but Germany’s DAX rose 0.3%. The negative sentiment extended to Wall Street, with Nasdaq and S&P 500 futures each down 0.2%.
Traders are eagerly awaiting Friday’s U.S. personal consumption expenditures (PCE) data, the Federal Reserve’s preferred inflation measure, which could provide insights into the Fed’s interest rate outlook. France, Italy, and Spain are also set to release inflation data on Friday.
“No one’s really going to be wanting to take any large positions ahead of tomorrow’s inflation data,” said Fiona Cincotta, senior markets analyst at City Index. She also noted that political uncertainty in Europe, particularly ahead of the French elections, is limiting market upside.
The first round of French parliamentary elections will take place on Sunday, with concerns about the potential success of far-right or far-left parties affecting market sentiment. Consequently, euro zone government bond yields reached their highest in two weeks, with the benchmark German 10-year yield up 2 basis points at 2.466%. The risk premium on French debt neared a seven-year high.
In the U.S., Treasury yields also increased, with the 10-year yield up 2 basis points at 4.3313%. Expectations for U.S. rate cuts have been delayed due to persistent inflation and strong economic data. U.S. jobless claims data are due later in the session. “If we get lower-than-expected jobless claims, that could really add fuel to the fire that the Fed may not even cut rates this year,” Cincotta said.
Yen Watch
The Japanese yen approached its weakest level in 38 years against the U.S. dollar, keeping markets alert for possible intervention. The dollar-yen pair was trading at 160.505, slightly down from its peak of 160.88 on Thursday. Japan’s finance minister expressed deep concern over the yen’s drop and indicated readiness to take necessary actions on currencies.
ING analysts suggested that Japanese authorities might wait until after Friday’s U.S. PCE data before intervening. “Should US data fuel more USD strength, then intervention would become almost inevitable – but with the new line in the sand potentially closer to 165,” ING FX strategist Francesco Pesole wrote.
The U.S. dollar index was slightly lower at 105.89, while the euro rose 0.2% to $1.07005. Oil prices edged higher, with Brent crude futures up 0.5% at $85.68 a barrel and U.S. West Texas Intermediate crude futures up 0.4% at $81.25 per barrel.
Source: Reuters
