European Stocks Expected to Follow US Markets Higher

The Nasdaq and S&P 500 both hit new all-time highs yesterday on re-emerging buying interest. Eurozone and UK markets look to hook onto the momentum.

US indices, driven by surges in big tech stocks, rose to start the week by posting new ATHs. European traders are looking to gain traction from the performance of their US peers. The DAX is up 0.31% and the CAC is up 0.48% on the day.

The UK stock market had a mixed session yesterday with a wide trading range and finished down only by 0.06%. But again, UK stocks look for momentum to the US and are up 0.8% on the day. The UK is facing a general election on July 4, which election polls are showing a likely Labour victory.

The left-wing Labour party is known for higher taxation and government spending. Along with more government bureaucracy and intervention, all things the capital markets don’t welcome. This is creating a tug of war between rosy economic perceptions and dark horizons from restrictive government policies.

France saw a lot of selling pressure on the heels of the populist party win in the EU elections last week. That seems to have faded as yesterday the CAC turned itself higher led by the rise in US stocks.

Inflation Data

Eurozone markets are now looking at Inflation data later this morning for more clues on just how soon the next ECB rate cut might be. Inflation is widely expected to rise slightly, from 2.4% last month to 2.6%.

A surprise in Eurozone data is highly unlikely and we can consider that this number is already priced in. Which means confirmation of the forecast could see the market rally further. For the UK we’re expecting Inflation data tomorrow.

The forecasts here are for another decline from 2.3% to 2.0%, while Core Inflation still well above the BoE target, is expected to decline also to 3.5% from 3.9%. Here we might see some surprises in the actual number.

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

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