Europe stocks look set to extend gains after BOE rate hold, Swiss cut; UK retail sales beat forecast

Jenni Reid

LONDON — European stocks are heading for a cautiously higher open Friday as investors monitor a slew of central bank decisions and data releases.

The pan-European Stoxx 600 index is on course for a weekly gain of more than 1.5%, its best performance since early May.

Equity markets have shaken off much of last week’s negativity after populist, far-right parties made strong gains in elections to the European Union Parliament. Even France’s CAC 40 index is heading for a weekly gain after being hammered by the country’s shock election announcement, though the euro remains on the back foot as investors brace themselves for a potential far-right victory in the euro zone’s second-largest economy.

Options volatility suggests traders see more risk of big currency movements stemming from France than they do for the British pound as a result of the U.K.’s own upcoming election, according to Reuters.

Attention this week turned to central bank action, as the Swiss National Bank announced it would cut interest rates by 0.25 percentage points to 1.25%. The SNB became the first major central bank to cut rates during this cycle back in March.

The Bank of England meanwhile kept interest rates unchanged at a 16-year high of 5.25%. Economists largely detected a dovish undertone to policymakers’ latest messaging, as they described a “finely balanced” decision not to cut, though by Friday money market bets on an August rate cut had fallen back down to around 40%.

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Bank of England holds interest rates steady despite inflation easing to 2% target

Switzerland trims key interest rate to 1.25% in second cut of the year

Data released Friday showed British retail sales volumes rose 2.9% in May, well ahead of expectations for a 1.5% increase and rebounding from a dour April performance when shoppers were deterred by wet weather.

Other releases Friday include French business confidence and German and British flash purchasing managers’ index figures across manufacturing and services.

Asia-Pacific markets were lower Friday after Japan’s May core inflation data came in slightly cooler than expected.

U.S. stock futures were little changed in the early hours.

Source : cnbc