Those European bourses which are open are edging higher, hovering around all-time highs. Markets in Germany, Switzerland, Norway, Austria, Denmark, and Hungary are closed for Whit Monday public holiday.
The public holiday in parts of Europe, combined with light news flow over the weekend has meant that the week has kicked off in a relatively quiet fashion. The lack of any major earnings and a bare economic calendar means the markets could be short of fresh catalysts on Monday. The FTSE and the CAC remain open.
Germany’s public health institute put the UK on its virus variant list. Passengers from the UK will have to quarantine for 2 weeks on arrival. Whilst the announcement initially sent travel stocks lower, the likes of EasyJet and Wizz Air are back in recovery mode rallying 1% and 0.7% respectively.
Oil stocks are also putting in a notable performance tracing the commodity price higher amid questions over the revival of the 2015 Iran nuclear deal.
Meanwhile, China’s crackdown on commodity speculation dragged raw material prices lower hurting resource stocks. China has upped its campaign to cool the raw materials boom seen in recent weeks announcing harsh punishments for violations such as excessive speculation and spreading fake news. Steel dived 5% whilst iron ore tanked by almost 10% the daily drop allowed.
Looking ahead across the week, the economic calendar is significantly quieter than last week. PCE data on Friday will keep the inflation debate alive and kicking. Until then, sentiment is likely to be a dominant driving factor, which can be dangerous in bored markets.
US futures are pointing higher after a mixed close on Friday. Declining expectations of a sooner move by the Fed is giving stocks rooms to rise. The outlook is likely to remain relatively mixed over the coming months until there is a clearer picture over what is going on with inflation and how transitory higher inflation really is.
FX -US dollar extends declines
The US dollar is edging lower in early European trade, hovering around a three-month low and extending a slide from the previous week. Expectations of the Fed tightening monetary policy soon appear to be fading away. The boost that the US dollar received following the release of the minutes from the Fed meeting was short-lived, even though several policymakers said that they were ready to discuss tapering asset purchases in the coming months.
Meanwhile, Fed speakers have been clear and unwavering in their view that there is no rush to withdraw stimulus despite signs of accelerating inflation. PCE data, the Fed’s preferred gauge of inflation is due on Friday. This will ensure that those inflation concerns which have been stalking the markets across recent weeks will continue to linger. A strong reading could well test the Fed’s resolve to keep its bond-buying programme at the current level.
