European stock markets, most of which remain closed for holidays on May 1st, accelerated on Thursday afternoon, closing with a good rise, while Brent moved lower compared to the peaks reached yesterday, and after the expected decision of the ECB and Bank of England to leave rates unchanged. Rumors in the US press according to which the US expects an updated proposal from Tehran to put an end to the conflict by tomorrow contributed to encouraging the purchases.
The decisions of the ECB and BoE
The ECB left the deposit rate at 2%, in line with expectations (with a decision taken unanimously but after an intense discussion also on a possible increase). President Christine Lagarde hinted that the Governing Council will consider a possible interest rate increase in June. “We made a thoughtful decision on the basis of still insufficient information,” he said at the press conference. “We discussed the decision we took unanimously today, but we also discussed at length and in depth the possibility of an increase in rates.” Asked whether the June meeting will lead to a rate increase – as investors and analysts currently expect – he replied that the next six weeks “will be an appropriate time” to evaluate the economy “in order to make an informed decision based on verified and reviewed information”.
“The key message is clear. The ECB does not intend to automatically react to a supply shock which, to date, has translated into an upward push concentrated on energy prices: a monetary policy intervention in this phase would risk amplifying the slowdown in growth without any real benefit on inflation – points out Martina Daga, Macro Economist of AcomeA SGR – It is a different story if the so-called “second round effects” materialise, i.e. if the increase in energy prices begins to spread to the rest of the consumer basket, wages and the price of services. In that case the anchoring of inflation expectations would be at risk and the ECB would have to intervene to guarantee price stability, its primary mandate”.
The Bank of England (BoE) voted 8 to 1 to keep the bank rate at 3.75%. Only one member of the Committee would have preferred an increase of 0.25%.
Key macro data
On the macroeconomic front, in the Eurozone in April headline flash inflation marked, as expected, a change of +3% y/y (from +2.6% in March), while core inflation of +2.2% (from +2.3%) thanks to a slowdown in services. The acceleration of the overall measure was mainly generated by energy (+10.9% y/y) which “should also push in the coming months both due to the disappearance of some tax cuts on fuel and a more widespread increase in components linked to gas and electricity”, Intesa Sanpaolo analysts point out, according to which euro area inflation should therefore rise further until reaching a peak close to +4% y/y in the autumn.
Again in the Eurozone, the preliminary GDP for the 2nd quarter recorded growth of +0.1% q/q (against +0.2% expected and previously) which was affected by the volatile Irish data: the main economies, with the exception of stagnant France, in fact showed performances above estimates (+0.3% q/q in Germany thanks to government stimuli, +0.2% in Italy and +0.6% in Spain). In March, euro area unemployment fell marginally to 6.2% (Italian unemployment fell to 5.2%).
Today’s session in Europe
Among the markets of the Old Continent, a positive trend was seen for Frankfurt, which advanced by a discreet +1.41%, London was effervescent, with an increase of 1.62%, and Paris advanced by 0.53%.
Earnings day for the Milan Stock Exchange, with the FTSE MIB showing a capital gain of 0.94%; along the same lines, the FTSE Italia All-Share ended the day up by 0.87%. The FTSE Italia Mid Cap has no direction (-0.07%); the FTSE Italia Star (+0.39%) is just above parity.
Among the best Blue Chips on Piazza Affari, A2A was well bought, marking a strong increase of 3.54%. Prysmian advanced by 2.90%. STMicroelectronics moves in positive territory, showing an increase of 2.87%. Money on Enel, which recorded an increase of 2.65%. The strongest declines, however, occurred on Stellantis, which closed the session at -6.36%. Moncler is under pressure, with a sharp decline of 2.03%.
Among the best stocks in the FTSE MidCap, Technoprobe (+5.86%), Cembre (+4.28%), LU-VE Group (+3.77%) and ERG (+2.22%). The worst performances, however, were recorded on BFF Bank, which closed at -13.66%. Black session for Ferretti, who leaves a loss of 5.66%. Maire lost 4.96%. New Princes suffers, showing a loss of 2.82%.
Next week
As May arrives, markets will face a week full of data and events, with US employment data as a key indicator in determining whether the labor market is stabilising. Attention will then shift to the decision of Norges Bank and the Riksbank. Meanwhile, the quarterly season will continue on both sides of the Atlantic.
Going into detail, the April US jobs report, due May 8, should show a largely stable job market. Analysts estimate an increase of 60,000 units in non-agricultural employment, after the strong fluctuations of recent months (January: +160,000, February: -133,000, March: +178,000). The unemployment rate is expected to remain stable at 4.3%.
As for central banks, while the Riksbank is likely to keep rates unchanged with a cautious stance – supported by subdued headline and core inflation, as well as a favorable short-term price outlook – the same cannot be said for Norges Bank. Some analysts expect Norway’s central bank to raise interest rates by 25 basis points as early as next week, with inflation remaining around 3% and with growing upside risks due to the recent increase in oil prices triggered by the ongoing conflict in Iran.
