European markets are set for a mixed opening on Thursday as investors digest a series of central bank moves. According to IG data, Germany’s DAX and France’s CAC 40 are expected to open slightly below the flatline, while the U.K.’s FTSE 100 is anticipated to nudge higher. The key focus today is on the Bank of England, which will announce its latest monetary policy decision at midday London time. Market expectations lean towards a 25 basis point interest rate cut from the U.K. central bank, signaling the beginning of a monetary easing cycle. However, analysts highlight an unusual degree of uncertainty surrounding this decision, despite inflation holding steady at 2%. Concerns persist among some voting members about inflation in the service sector and wage growth.
This decision comes on the heels of the U.S. Federal Reserve’s recent move to maintain rates, a widely anticipated outcome. During his press conference, Fed Chair Jerome Powell suggested that a rate cut in September is “on the table,” provided that inflation data supports it. Powell, however, seemed to dismiss the possibility of a larger 50 basis point cut.
Meanwhile, investors are still absorbing the surprise move from the Bank of Japan on Wednesday, which raised its benchmark interest rate to around 0.25%, the highest level since 2008. This decision boosted the yen to a four-and-a-half month high against the U.S. dollar and caused a decline in Japanese stocks. The Bank of Japan also hinted at further tightening, adding to the market’s uncertainty.
As central banks take center stage, earnings season continues to provide significant market signals. In U.S. trading on Wednesday, the tech-heavy Nasdaq Composite jumped 2.64% after Advanced Micro Devices reported a strong quarter. Facebook parent Meta also saw a rally in extended trading, driven by better-than-expected results. European technology stocks mirrored this positive performance, with notable gains. Chipmaker ASML surged following a Reuters report suggesting it might be exempt from U.S.-led Chinese export restrictions.
On the earnings front, oil major Shell and British bank Barclays are among the prominent firms reporting on Thursday. Investors will closely scrutinize these reports for further insights into economic health and corporate performance, amid a backdrop of central bank actions and broader macroeconomic shifts.
