FX.co ★ European Shares Seen Up As Inflation Data Revives Fed Rate Cut Bets

European stocks are anticipated to open higher on Thursday, buoyed by eased inflation, prompting investors to expect two U.S. rate cuts in 2024.

According to CME FedWatch data, over half of traders foresee a rate cut in September.

Asian markets saw significant gains, with Australia's and New Zealand's markets leading the regional surge, fueled by a rally in government bonds. Japanese shares also performed well despite the economy contracting more than predicted in the first quarter of 2024.

A weaker dollar supported gold prices, pushing them towards $2,400 per ounce. Meanwhile, oil prices increased after data showed a larger-than-expected drop in commercial crude stockpiles.

The trading landscape later today might be influenced by U.S. economic data releases, including reports on weekly jobless claims, industrial production, and import and export prices.

In the U.S., stocks rose sharply overnight. April retail sales unexpectedly remained flat, while consumer prices rose less than expected, and core CPI slowed, raising hopes for upcoming interest rate cuts by the Federal Reserve.

Treasury yields dipped as consumer prices increased by 0.3 percent in April, following a 0.4 percent rise in March. Economists had predicted a repeat of the 0.4 percent increase. Annually, the CPI slowed to match expectations at 3.4 percent, down from 3.5 percent.

Core inflation, excluding food and energy, decelerated from 3.8 percent to 3.6 percent, the lowest reading since April 2021.

The S&P 500 climbed 1.2 percent, surpassing the 5,300 mark for the first time. The Dow rose 0.9 percent, nearing the 40,000 milestone, while the tech-heavy Nasdaq Composite surged 1.4 percent.

European stocks closed broadly higher on Wednesday as investors welcomed the cooler-than-expected U.S. inflation figures alongside positive Eurozone industrial production and GDP data.

The pan-European STOXX 600 gained 0.6 percent. Germany's DAX rose by 0.8 percent, while France's CAC 40 and the U.K.'s FTSE 100 both increased by 0.2 percent.