European stocks set for muted open after U.S. inflation data; ECB meeting on horizon

Key Points

• U.S. consumer prices rose by 8.5% in March from the previous year — the highest level since 1981 — further fueling concerns of tighter monetary policy from the Federal Reserve.
• Back in Europe, market focus is attuned to the ECB’s policy decision on Thursday, as the Governing Council balances slowing growth and record-high inflation, increasing the risk of stagflation.

LONDON — European markets are set for a cautious open on Wednesday as investors digest a key inflation print from the U.S. and look ahead to Thursday’s European Central Bank meeting.

Britain’s FTSE 100 is set to nudge a single point higher to 7,578, Germany’s DAX is seen around 28 points lower at 14,097 and France’s CAC 40 is expected to nudge around 8 points higher to 6,545, according to IG data.

U.S. consumer prices rose by 8.5% in March from the previous year — the highest level since 1981 — further fueling concerns of tighter monetary policy from the Federal Reserve. Core CPI rose 0.3%, slightly below expectations.

U.S. stock futures advanced in early premarket trading, with traders hoping that March may have shown a peak in inflation, after major indexes gave up an early rally to close in the red on Tuesday.

Shares in Asia-Pacific were mostly higher on Wednesday after Chinese exports rose more than expected in March, while New Zealand also hiked its main interest rate rate by 50 basis points, its biggest increase in more than 20 years.

Back in Europe, market focus is attuned to the ECB’s monetary policy decision on Thursday, as the Governing Council balances slowing growth and record-high inflation, increasing the risk of stagflation.

“Our base case is that ECB policy will remain unchanged at this week’s meeting, with details on the end to quantitative easing (QE) being unveiled at the July meeting,” said Gurpreet Gill, macro strategist for fixed income at Goldman Sachs Asset Management.

“An end to the Asset Purchase Programme has already been signalled for the third quarter, so the focus on Thursday will be on any changes to that timeline – a sooner conclusion to QE would open the door to earlier rate hikes.”

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The World Trade Organization on Tuesday slashed its forecast for global trade growth this year to 3% from 4.7% because of the “double-whammy” caused by the Russia-Ukraine war and Covid-19, and warned that soaring prices could facilitate a food crisis.

U.K. intelligence has suggested that Russian forces are readying a large and more focused push to expand control of eastern Ukraine, while the British foreign secretary said on Tuesday that the government is working to verify details of an alleged chemical weapons attack in the Ukrainian city of Mariupol.

On the data front, U.K. inflation came in at an annual 7% in March, its highest since for 30 years.

Consumer prices rose by 1.1% month-on-month, outstripping expectations for a 0.7% climb in a Reuters poll of economists, which had projected a 6.7% annual increase.

Source : CNBC