Euro Stoxx 50, IBEX 35, ECB, US CPI, Inflation – Talking Points
- IBEX 35 trend remains negative as energy prices put consumers in a pinch
- Euro Stoxx 50 outlook remains neutral ahead of inflation data on Friday
- US CPI shows inflation slowing, yet still running hot at 5.3% increase year-over-year
European stocks closed mixed on Tuesday as market participants eagerly awaited key inflation data from the US. The consumer price index (CPI) increased 0.3% from the previous month against a street expectation of 0.4%. Despite the better than expected print, which lends credence to the Fed's transitory view, US indices also reversed lower.
Investors may have become more risk-averse as the notion of cooling inflation may impact when the Federal Reserve decides to taper. With a Fed policy meeting right around the corner, market participants may remain on edge as to any sudden shift(s) in monetary policy. Specifically for Europe, a shift from the Fed may pave the way for the European Central Bank (ECB) to move towards tightening, just one week after the ECB decreased asset purchases in a“recalibration.” For more on the CPI print from earlier, click here.
IBEX 35 1 Hour Chart
Chart created with TradingView
Spanish equities have experienced a sluggish start to September, retreating over 270 points from the monthly high on September 1. Despite the ECB leaving rates unchanged and pledging to continue monetary support, the“recalibration” of asset purchases may continue to weigh on sentiment. Rising inflation across the continent also appears to be worrying market participants, evidenced by the recent jump in energy costs in Spain. The government announced it was cutting energy taxes and redirecting corporate profits in an emergency effort to lower the burden on consumers.
Euro Stoxx 50 1 Hour Chart
Chart created with TradingView
Unlike its Spanish counterpart, the Euro Stoxx 50 has been relatively choppy of late, as market participants digested an ECB policy meeting and two key data prints from the US (jobs & CPI). Despite the lack of direction, price has been supported by an ascending trendline, hinting that an exploration of higher prices may be on the cards. Reaction to last week's ECB meeting was muted, with price gyrating between 4,210 and 4,150. In what is a relatively light week on the calendar, market participants may look to Friday's release of inflation data for event-linked volatility. The print may potentially shift the market's outlook on ECB policy.
Key Eurozone Economic Events
Courtesy of the DailyFX Economic Calendar
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--- Written by Brendan Fagan, Intern
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