Tech Stocks Spark Rally as ECB Approaches – Reuters

Market Insights: European and Global Trends Ahead

Asian stock markets experienced a positive shift, largely driven by renewed interest in technology stocks, particularly Nvidia. Investors are also looking forward to a nearly certain rate cut from the European Central Bank (ECB) and potential insights into future monetary policy.

The optimism in Asia helped counterbalance some pressures from the decreasing likelihood of a substantial half-point rate cut by the Federal Reserve in the coming week.

An eagerly awaited U.S. inflation report revealed that the core Consumer Price Index (CPI) increased by 0.28% in August, marginally above the anticipated 0.2% rise. This prompted market speculation that the Fed would proceed with a 25 basis point rate cut at its upcoming meeting on Wednesday.

As a result, short-term yields climbed, and the dollar regained strength against the yen, which retreated from its recent high.

The weaker yen contributed to a nearly 3% increase in Japanese stocks, overshadowing more hawkish remarks from a senior Bank of Japan official, who suggested that rates should eventually reach 1%.

In Europe, markets are poised for solid gains ahead of a significant event: the ECB’s policy decision. Futures for the EUROSTOXX 50 surged by 1.2%, while other major indices rose by 1%.

A quarter-point rate cut is widely anticipated, but uncertainty remains regarding further cuts in October and December. Inflation-sensitive policymakers still dominate, with markets pricing in only about a 40% chance of a rate change next month.

The most likely scenario is that ECB President Christine Lagarde will maintain the recent stance that decisions are made based on incoming data, on a meeting-by-meeting basis.

Following the ECB’s decision, attention will shift back to the U.S., where weekly jobless claims and producer price index (PPI) data are scheduled for release. Jobless claims have gained increased significance due to the Fed’s focus on labor market health. A figure exceeding the expected 230,000 could reignite discussions around a possible 50 basis point cut.

Economists project a 0.1% increase in the PPI for last month, with certain data aspects aiding analysts in refining their forecasts for the Personal Consumption Expenditures Price Index—the Fed’s preferred inflation measure—set to be released on September 27.

Key Events to Watch on Thursday:

• ECB policy meeting and subsequent briefing by President Christine Lagarde
• U.S. weekly jobless claims report
• U.S. PPI data release

(Reported by Stella Qiu; Edited by Edmund Klamann)