Europe’s broad Stoxx share index, added 1.1% on Friday morning as a weak euro flattered the domestic value of exporters’ dollar earnings
European stocks were on track to race ahead of Wall Street on Friday, with exporter shares in high demand as the continent’s major currencies declined against dollar on bets the U.S. Fed would keep interest rates high.
Europe’s broad Stoxx share index, added 1.1% on Friday morning as a weak euro flattered the domestic value of exporters’ dollar earnings.
London’s FTSE 100 was up 1.3%, boosted by global mining and oil stocks.
Futures markets implied Wall Street’s S&P 500 share index, which is on track for its second weekly decline, would open 0.1% lower, while Nasdaq 100 futures shed 0.3%.
MSCI’s all-country equity index was steady, on course for its second weekly drop after hotter-than-expected consumer price data mid-week forced traders to sharply pare back on U.S. rate-cut bets.
Money-market pricing implied investors expect the Federal Reserve to reduce its main funds rate by around 45 basis points in 2024. U.S interest rates are at a 23-year high of 5.25%-5.5% and traders started 2024 betting on around 150 basis points of cuts.
In the near term it is going to be harder for the Fed to cut than for the ECB, according to Marcelo Carvalho, global head of economics at BNP Paribas.
The U.S. labour market is strengthening and its economy is outshining global peers, while euro zone inflation is declining towards the ECB’s 2% goal as growth and bank lending in the euro currency bloc weaken.
Investors are starting to wonder if the Federal Reserve will be able to cut at all this year, according to Barclays analyst Anshul Pradhan.
The dollar index added 0.5% on Friday to 105.82, taking the U.S. currency’s weekly gain against a basket of major rivals to 1.5%.
Japan’s yen hit a 34-year low of 153.34 per dollar as traders waited for signs that authorities in Tokyo might intervene to strengthen the weakening currency.
The ECB and the BoE are forecasted to begin reversing their own historically aggressive monetary tightening efforts sooner, in a trend that has weighed on the euro and sterling this week.
The European Central Bank on Thursday strongly signalled it would lower its main deposit rate from a record 4% in June.
The euro hit a five-month low of $1.0674 on Friday. Sterling, previously a popular carry trade currency for speculators who believed the Bank of England would cut after the Fed, slipped to $1.2508, also a near five-month low.
