Germany is leading the biggest rally in global bond markets since March’s banking rout as cooling inflation and a weakening economy suggest European Central Bank rate hikes are nearing an end. Borrowing costs, or bond yields, in the benchmark euro area issuer are down at least 20 basis points (bps) this week. Alongside British and U.S. peers, yields – which move inversely to bond prices – were set for their biggest weekly declines since mid-March…
European Stock Futures Higher; U.S. Debt Optimism, Solid Earnings Help Tone
European stock markets are expected to open higher Friday, benefiting from the global optimism that a U.S. debt default will be avoided, but concerns about future growth remain. At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.3% and the FTSE 100 futures contract in the U.K. rose 0.2%. On Wall Street, the S&P 500 and Nasdaq Composite indices closed at their highest levels since August 2022, and in Asia Japan’s Nikkei 225 has surged to its highest level since 1990. This follows top U.S. congressional Republican Kevin McCarthy indicating confidence that an agreement to lift the U.S. debt ceiling, and thus preventing the country from defaulting on its obligations, can be achieved in the near future. “I see the path that we can come to an agreement,” McCarthy said Thursday. “And I think we have a structure now and everybody’s working hard, and I mean, we’re working two or three times a day, then going back getting more numbers.” This optimism is expected to continue in Europe Friday, adding to the positive tone generated by a significant number of major European companies delivering stronger-than-expected first-quarter results. About half of the STOXX 600 companies have reported first-quarter results so far and two-thirds of them exceeded estimates.
Friday Is Set to Be Relatively Quiet In Terms of Corporate Results.
with a trading update from U.K. engineering company Smiths Group (LON:SMIN) the highlight. However, it’s likely that more difficulties lie ahead as cash-strapped consumers rein in their spending and the first quarter’s relatively robust corporate margins come under pressure. The European Central Bank raised interest rates earlier this month and further hikes look likely, with ECB Vice President Luis de Guindos saying on Thursday that he’s particularly concerned about the accelerating inflation in service industries. German producer prices rose 0.3% in April, data showed earlier Friday, an annual rise of 4.1%, more than twice the ECB’s targeted inflation level. Oil prices rose Friday as traders took advantage of the optimism surrounding the potential raising of the U.S. debt ceiling to buy back into heavily discounted markets. The crude market is on course to add around 3% this week, the biggest weekly gain since early April, breaking a run of four straight weeks of losses. However, the immediate outlook still remains gloomy with elevated inflation data pointing to more interest rate hikes from global central banks and as weak economic data from China, the world’s largest crude importer, continued to emerge. By 02:00 ET, U.S. crude futures traded 0.6% higher at $72.31 a barrel, while the Brent contract climbed 0.7% to $76.39. Additionally, gold futures rose 0.3% to $1,965.10/oz., while EUR/USD traded 0.1% lower at 1.0768.