European stock markets demonstrated a mixed performance on Thursday, with the U.K. market standing out as investors awaited developments from a pivotal European Central Bank (ECB) policy-setting meeting.
As of 03:25 ET (07:25 GMT), Germany’s DAX index exhibited a marginal 0.2% decline, while France’s CAC 40 recorded a similar 0.2% dip. In contrast, the FTSE 100 in the United Kingdom showcased a modest 0.3% uptick.
ECB Rate Decision Hangs in the Balance
The spotlight firmly rests on the upcoming ECB meeting, where policymakers find themselves at a crossroads, faced with the crucial decision of whether to increase the key interest rate to an all-time high or temporarily halt their prolonged rate-hiking campaign amidst signs of deterioration in the eurozone’s economy.
The central bank’s history reveals that it has implemented rate hikes during each of its past nine meetings. Should it opt for another increase of 25 basis points, the key deposit rate would surge to 4%, marking the loftiest level since the introduction of the euro currency in 1999.
ECB President Christine Lagarde hinted at a possible pause during her press conference following the last meeting held in late July. However, a recent Reuters report indicated that the central bank was poised to raise its inflation forecast for the upcoming year, projecting it to surpass 3%. This development has seemingly elevated the likelihood of an interest rate hike.
Analysts at ING maintain that “a very heated debate with a close outcome” is anticipated. They stated, “While there are good arguments to justify both a pause and another rate hike, we are sticking to our view that the ECB will hike rates one final time.”
U.S. Inflation Data to Influence Decision-Making
Across the Atlantic, the Federal Reserve, ECB’s counterpart in the United States, prepares for its meeting next week. Following the release of the latest consumer inflation data on Wednesday, policymakers are set to grapple with a similarly challenging decision.
The figures revealed that U.S. consumer prices experienced their most substantial increase in 14 months in August, primarily driven by rising gasoline costs. However, the year-on-year surge in underlying inflation marked its smallest increase in nearly two years.
Despite the data, analysts at ING believe that “the Fed will still keep rates on hold in September,” albeit they anticipate officials to retain “one final hike in their official forecasts,” even if its execution appears uncertain.
Additional U.S. Inflation Data Awaited
Later on Thursday, the market will receive further U.S. inflation data in the form of August producer prices. Additionally, retail sales figures are anticipated to illustrate a deceleration in growth rates as consumers exercise caution in their spending.
Arm Holdings Set to Begin Trading After Going Public
In the corporate sector, Arm Holdings, a British chip design company established in 1990, is poised to commence trading on the New York Stock Exchange later in the session. This development marks Arm’s return to public markets after being taken private by SoftBank (TYO:9984) in 2016.
With an oversubscribed $51-a-share float that garnered 12 times the demand, Arm Holdings currently boasts a valuation of $54.5 billion. This overwhelming demand suggests a favorable initial trading reaction.
Crude Oil Maintains 10-Month Highs
Oil prices registered gains on Thursday, reflecting tight supplies throughout the year and robust confidence in the demand outlook. This positive sentiment persists despite an increase in U.S. crude stockpiles.
The International Energy Agency (IEA), in its monthly report released on Wednesday, echoed the expectations of the Organization of Petroleum Exporting Countries (OPEC) regarding further tightening in oil markets this year. This optimism, coupled with Saudi Arabia and Russia extending their oil output cuts into 2023, propelled both oil benchmarks to 10-month highs on Wednesday. The increase in U.S. crude inventories by 4 million barrels last week, contrary to analyst projections of a 2 million barrel decrease, had a minimal impact.
As of 03:25 ET, U.S. crude futures were trading 0.7% higher at $89.12 per barrel, while the Brent contract saw a 0.6% ascent to $92.44.
Moreover, gold futures experienced a 0.2% decline, reaching $1,927.85 per ounce, and the EUR/USD exchange rate displayed a marginal 0.1% increase, standing at 1.0736.
