European Stocks Waver as Traders Assess Rate Path: Markets Wrap

(Bloomberg) — European shares struggled for traction after a European Central Bank official warned that policy will have to stay restrictive through 2024 even as policy makers remain on course to cut rates next month.

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The Stoxx Europe 600 index was little changed at the open in light trading, with UK and US markets closed for holidays. American equity futures and the dollar were steady.

The European Central Bank is on track to start cutting interest rates next month, but will have to keep policy in restrictive territory all year long, Chief Economist Philip Lane told the Financial Times in an interview published Monday. An rate cut in June has been widely telegraphed, but subsequent steps are less clear. Data this week may show headline inflation in the euro region ticked up in May.

“European inflation is back,” though the May spike may be temporary, Credit Agricole SA strategists led by Jean-François Paren wrote in a note. “This does not call the June cut into question but adds risk of de-pricing additional cuts later.”

The MSCI Asia Pacific index posted its biggest gain since May 16, led by stock gauges in Hong Kong, China, and Japan.

A swath of inflation prints from Australia to Japan, the euro region and the US is due this week as traders finesse bets on the outlook for monetary policy. The Fed’s favorite measure of underlying inflation is due on Friday and is expected to show modest relief. Federal Reserve Chair Jerome Powell has streesed the need for more evidence that inflation is on a path to the 2% goal before easing policy.

The ECB’s Lane is due to speak about inflation in Dublin on Monday. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers due to speak this week.

Read More: About the ‘T+1’ Rule Making US Stocks Settle in a Day: QuickTake

Trading of cash Treasuries was closed. The “T+1” rule that has the potential to cause trouble for overseas investors will come into effect when traders return from the long weekend — making US equities settle in one day rather than two.

Meanwhile, gold edged higher, while iron ore and copper futures fell. Crude oil steadied after its biggest weekly loss in four. This year has witnessed a rolling series of commodity price spikes thanks to supply constraints, surging demand and even some speculative activity.

Some key events this week:

ECB’s Philip Lane speaks in Dublin on inflation, Monday
IMF holds discussions with Ukrainian authorities to review economic policies as the country seeks to unlock next tranche of $2.2 billion in aid, Monday
Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knot address Barclays-CEPR International Monetary Policy forum, Tuesday
South African election, the most significant since the end of apartheid, Wednesday
Fed releases Beige Book economic survey, Wednesday
South Africa rate decision, US initial jobless claims, GDP, wholesale inventories, Thursday
New York Fed President John Williams speaks at the Economic Club of New York, Thursday
GDP data published for Canada, Eurozone, Turkey, Friday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

Some of the main moves in markets:

Stocks