European Stocks Open Higher as Investors Await Central Bank Meetings and Economic Data
LONDON, Oct 30 (Reuters) – European stock indexes opened slightly higher on Monday as investors turned their attention to upcoming central bank meetings and economic data, seeking clues about the future of interest rates.
The Bank of Japan (BOJ), the U.S. Federal Reserve, and the Bank of England (BoE) are set to hold meetings this week. These meetings, along with key economic data releases, such as Chinese manufacturing data and U.S. jobs data, will be closely watched for any signs that central banks are raising interest rates to combat inflation or considering easing monetary policy.
In addition, several major companies, including Apple, Airbnb, McDonald’s, Moderna, and Eli Lilly & Co, are scheduled to report their earnings this week. So far, the results have been disappointing, contributing to the retreat of the S&P 500 into correction territory.
As of 0834 GMT, the MSCI World Equity Index was relatively unchanged, up 0.3% on the day but still near its lowest level since late March. The Asian session saw subdued stock performance, with MSCI’s broadest index of Asia-Pacific shares outside Japan up just 0.1%, after hitting a one-year low last week.
In Europe, the STOXX 600 was up 0.7%, and London’s FTSE 100 rose 0.8%.
Investors are particularly interested in any indications about when central banks might consider cutting interest rates. Samy Chaar, chief economist at Lombard Odier, stated, “The market is looking for ‘confirmation of the peak rate policy by central banks and any indication that might lead to thinking that perhaps central banks will be in a position to cut (rates) by the middle of next year.'”
Meanwhile, Japan’s Nikkei fell 0.95% amid speculation that the BOJ might adjust its yield curve control policy. Many analysts expect the central bank to raise its inflation forecast to 2.0%, but it remains uncertain whether it will abandon yield curve control due to market pressure on bonds. Bond yields in the eurozone were lower, with the benchmark 10-year German yield down 5 basis points at 2.787%.
Despite inflation in Germany falling, investors continue to anticipate persistently high rates in the region. Yields on 10-year Treasuries reached 4.8602%, marking an increase of around 28 basis points this month. The U.S. Treasury’s announcement of its refunding plans this week will further test market sentiment, with more rate hikes expected.
The recent rise in borrowing costs has led analysts and markets to believe that the Federal Reserve will maintain its current policies at this week’s meeting.
The U.S. dollar index remained steady at around 106.650, while the euro fell slightly by less than 0.1% to $1.0556. The dollar was flat against the yen at 149.62, below last week’s peak of 150.78.
Risk appetite was somewhat dampened by Israel’s recent actions in Gaza, but analysts believe that this is just one of several factors impacting market sentiment.
Michael Hewson, chief market analyst at CMC Markets UK, wrote in a client note, “It’s easy to blame last week’s declines in equity markets on the unpredictable nature of events in the Middle East. However, poor company updates and downgrades to guidance also contributed to the decrease.”
Investors will be watching closely to see if the conflict escalates beyond the region and whether it disrupts oil markets. Despite the other factors at play, Samy Chaar from Lombard Odier noted that there is still some premium on gold, which reached a five-month high of $2,009.29 on Friday.
Oil prices fell by more than 1% as concerns about demand outweighed risks to Middle East supplies.
Reporting by Elizabeth Howcroft; Additional reporting by Wayne Cole in Sydney; Editing by Mark Potter