Month: November 2023

(Reuters) -European shares edged higher on Monday after a strong week driven by aggressive bets on interest rate cuts, while drugs-to-pesticides group Bayer posted its worst day ever weighing on the healthcare sector and Germany’s benchmark index.

The pan-European STOXX 600 inched 0.1% higher after jumping nearly 3% last week.

As investors started pricing in 100-basis-point rate cuts for 2024 with the first one seen as soon as April, European Central Bank officials shunned market optimism, flagging still-high inflation and a somewhat resilient economy.

European shares inch up after robust week; Bayer tanks

(Reuters) – Financial markets are ramping up expectations for interest rate cuts from the European Central Bank, betting it will be the first major central bank to ease policy to buffer a euro zone economy facing recession in contrast to a robust United States.

Last week money market traders anticipated that the ECB, U.S. Federal Reserve and the Bank of England (BoE) would all start easing monetary policy in the second half of 2024 as inflation eases and recent interest rate hikes slow economic growth.

Yet that changed after data on Tuesday showed euro zone inflation dropped more than expected to its lowest in over two years in October, while the economy shrank during the third quarter, raising the risk of a year-end recession.

With investors confident that big central banks are likely done raising rates, focus has switched to when rate cuts will start.

Traders now price in over an 80% chance of a 25 basis-points (bps) ECB cut by April, which had been fully priced for July last week.

https://www.globalbankingandfinance.com/analysis-traders-bet-ecb-will-be-first-big-central-bank-to-cut-rates/