The US inflation report out on Tuesday could have a huge role in determining when and by how much the Federal Reserve decides to cut interest rates.
European shares inched up on Monday morning, as investors looked ahead to the US inflation report for January due for release on Tuesday. The report is expected to heavily influence whether the US Federal Reserve will loosen monetary policy in March, or will instead wait until May.
However, despite monetary loosening, inflation for certain products such as cocoa and chocolate may still take a while to come down, because of adverse weather in key cocoa producing countries such as Ghana and Ivory Coast.
Other supermarket and retail chain product prices could also be slow in falling, due to the ongoing Red Sea crisis continuing to cause significant delays in shipments. This is leading to both unavailability of several products, as well as prices rising significantly for others.
The CAC 40 rose 0.49% to 7,685.5 on Monday morning, while the Stoxx 600 index inched up 0.40% to 486.7. On the other hand, the FTSE 100 was down 0.21% at 7,556.7.
Asian markets were relatively quiet, due to several countries such as Singapore, China and Japan celebrating the Lunar New Year.
Luxury and utilities stocks advance, software dulls
L’Oreal was one of the top gainers on the CAC 40 index on Monday morning, climbing up 3.52% to €433.6. This was a robust recovery following the company’s share price recently slipping about 8% due to Asian sales struggling.
Utilities company Engie was another top performer on Monday, gaining 1.40% to €14.3, following the company revealing it was planning on selling its stake in Senoko Energy, a Singapore-based electric utility company.
At the lower end of the scale, Software giant Dassault Systemes fell 1.48% to €43.2. The company recently paired up with BMW to work on the latter’s engineering platform.
Aircraft equipment manufacturer Safran was another faller, dipping 0.74% to €175.0. The company recently partnered with Turbotech to test its first hydrogen turboprop for light aircrafts.
What to watch in the week ahead
On Tuesday, apart from US inflation, investors are also awaiting the UK unemployment rate for December and the French unemployment rate for Q4 2023, as well as the Turkish retail sales for December. The German Economic Sentiment Index for February is also expected on the same day.
Wednesday will see the UK inflation report for January, as well as the Euro Area gross domestic product (GDP) report for the fourth quarter of last year. UK GDP figures for Q4 2023 will be released on Thursday, as will US retail sales.
A number of speeches from the US Federal Reserve members throughout the week, as well as a speech by European Central Bank (ECB) President Christine Lagarde, are all expected this week.
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