European Shares Likely To Open Lower Ahead Of ECB Rate Decision

European stocks are seen opening broadly lower on Thursday as investors look ahead to the ECB’s monetary policy announcement and Fed Chair Jerome Powell’s second day of testimony on Capitol Hill, due later in day.

The European Central Bank (ECB) will likely hold rates at record highs and could announce baby steps towards cutting them in the coming months depending on the evolving inflation and growth outlook.

During his second day of testimony before the Senate Banking Committee later today, Powell is expected to double down on his message that there’s no rush to cut interest rates.

Minneapolis Fed President Neel Kashkari said in an interview that he saw no more than one or two rate cuts this year and that rates may stay higher for longer, if inflation proves to be more entrenched than initially thought.

German factory orders data for January along with U.S. reports covering weekly jobless claims, foreign trade in January, and fourth quarter labor productivity and unit labor costs may also garner attention later in the day.

Asian stocks traded mixed, with Chinese and Hong Kong markets declining despite Chinese trade figures for the combined period of January and February remarkably exceeding expectations.

China’s exports during the period rose 7.1 percent year-on-year, while imports increased 3.5 percent, customs data revealed earlier today.

Geopolitical tensions remained firmly on investors’ radar after reports suggested the U.S. government is pressing allied nations to further tighten restrictions on China’s access to semiconductor technology.

Japan’s Nikkei fell about 1 percent as the yen extended gains on jitters over a BOJ pivot.

Gold hit a fresh record high above $2,150 per ounce as the dollar index fell to a five-week low.

Oil prices were marginally lower, after having risen sharply on Wednesday, supported by heightened Middle East tensions and Saudi Arabia’s decision to raise prices for its flagship crude grade to Asia.

U.S. stocks rose overnight after Powell signaled in testimony to a House of Representatives that the Fed is on track to cut interest rates “at some point this year” but officials need “greater confidence” inflation is moving sustainably toward 2 percent.

Powell described the U.S. economic outlook as “uncertain” and noted that bringing down inflation was “not assured.”

He further stressed that future interest rate decisions will be based on careful assessment of the incoming data, the evolving outlook, and the balance of risks.

In economic releases, U.S. job openings fell marginally in January and private sector employment rose less than expected in February while the Fed’s Beige Book survey showed the U.S. economy expanded at a modest pace in early 2024.

The tech-heavy Nasdaq Composite climbed 0.6 percent while the S&P 500 gained half a percent and the Dow edged up 0.2 percent.

European stocks closed higher on Wednesday as the British government unveiled a pro-growth budget and data showed retail sales in the euro zone rebounded slightly in January.

The pan European STOXX 600 advanced 0.4 percent. The German DAX inched up 0.1 percent, France’s CAC 40 rose 0.3 percent and the U.K.’s FTSE 100 added 0.4 percent.

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