by Diana Mandia

(Reuters) – Major European stocks are expected to open higher on Monday ahead of a series of data on euro zone private sector activity, while U.S. inflation figures due later in the week will be closely watched, with the prospect of another rate cut by the U.S. Federal Reserve as early as November.

According to the first available indications, the Parisian CAC 40 could gain 0.55% at opening.

Futures are signaling a rise of 0.43% for the Dax in Frankfurt, 0.33% for the FTSE in London and 0.49% for the EuroStoxx 50.

The week is expected to start on a positive note after the Fed’s decision to begin its monetary easing cycle with a 50 basis point cut last week, which encouraged investors to bet on a soft landing for the US economy, and before the publication on Monday of a new round of indicators on economic activity in the euro zone.

The composite purchasing managers’ index (PMI) on economic activity in the euro zone will provide a snapshot of the state of the European economy, and in the US, the personal consumption expenditure (PCE) index, the Fed’s preferred gauge of inflation due on Friday, will show whether price pressures have continued to moderate, potentially leading to a second interest rate cut in November.

Futures contracts show a 50% probability that the Fed will taper aggressively in two months.

Monetary policy will remain in the foreground this week: after the Fed, traders expect the Swedish and Swiss central banks to cut their key rates at the end of their respective meetings on Wednesday and Thursday.

“We note that launching a cycle with a 50 basis point move without a looming financial crisis or job losses is highly unusual for the Fed,” said Barclays analyst Christian Keller. “We therefore believe this move signals the Fed’s determination to avoid a deterioration in labor market conditions, or in market jargon, to achieve a soft landing,” he added.

VALUES TO FOLLOW:

A WALL STREET

The New York Stock Exchange ended near breakeven on Friday as investors took a breather after the previous session’s sharp rally, fueled by a major interest rate cut by the Federal Reserve.

The Dow Jones gained 0.09%, the broader Standard & Poor’s 500 lost 0.19% and the Nasdaq Composite fell 0.36%.

IN ASIA

The Tokyo Stock Exchange is closed Monday for the Autumn Equinox Day, limiting trading in Asian markets. The Nikkei index rose 3.1 percent over the week as a whole after the Bank of Japan (BOJ) said it was in no hurry to tighten monetary policy further.

In China, stock markets rose for the fourth consecutive session on Monday as investors increasingly expected Beijing to unveil new economic stimulus measures.

The People’s Bank of China (PBoC) also injected 234.6 billion yuan ($33.29 billion) into the banking system through “open market operations,” saying it wanted to “keep end-of-quarter liquidity at a reasonable level in the banking system.” The bank had unexpectedly kept its long-term benchmark rates unchanged last Friday.

The Shanghai Stock Exchange Composite Index rose 0.66% and the CSI 300 of large capitalizations rose 0.68%.

The Hong Kong Stock Exchange, more sensitive to estimates of the Fed’s rate evolution, gained 0.36%, supported by energy, technology and banking stocks.

RATE

The yield on 10-year Treasuries rose 1.3 basis points to 3.7413%, while the two-year gained 2.3 basis points to 3.5973% as investors digested the Fed’s monetary policy decision.

On the foreign exchange market, the dollar gained 0.03% against a basket of benchmark currencies after hitting its lowest level in a year last week, while the euro advanced 0.02% to 1.1164 dollars.

OIL

Oil prices rose Monday on fears of a worsening Middle East conflict, while the Fed’s interest rate cut boosted hopes of strong demand.

Brent gained 0.77% to $75.06 per barrel and light US crude (West Texas Intermediate, WTI) gained 0.85% to $71.60.

MAIN ECONOMIC INDICATORS ON THE AGENDA FOR SEPTEMBER 23:

COUNTRY GMT INDICATOR PERIOD CONSENSUS PREVIOUS

FR 7:15 a.m. S&P/HCOB PMI September 44.3 49.3

manufacturer (1st

estimate)

S&P/HCOB PMI Index 52.5 55.0

services (1st estimate)

S&P/HCOB Composite PMI 50.6 53.1

(1st estimate)

FROM 07:30 S&P/HCOB PMI Index Sept. 42.3 42.4

manufacturer (1st

estimate)

S&P/HCOB PMI Index 51.0 51.2

services (1st estimate)

S&P/HCOB PMI Index 48.2 48.4

composite (1st estimate)

EZ 08:00 S&P/CIPS PMI September 45.6 45.8

manufacturer (1st

estimate)

S&P/CIPS PMI 52.1 52.9

services (1st estimate)

S&P/CIPS PMI Index 50.5 51.0

composite (1st estimate)

GB 08:30 S&P/HCOB PMI September 52.5 52.5

manufacturer (1st

estimate)

S&P/HCOB PMI Index 53.5 53.7

services (1st estimate)

S&P/HCOB Composite PMI 53.5 53.8

(1st estimate)

(Written by Diana Mandiá)

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