European indices are pushing higher in early trade, as optimism over the direction of US earnings provide a tailwind behind tech stocks in particular. While European markets have suffered from a somewhat difficult time of late, the tech sector helped drive the S&P 500 into a record high once again on Friday. This week sees the first of the so-called ‘magnificent seven’ stocks report, with Tesla earnings due after the bell on Wednesday. However, traders have been looking for clues elsewhere over the potential trajectory for AI stocks, with signs of strong demand at Supermicro computer (Cloud) and Taiwan Semiconductor (Chips) helping to lift expectations of how the big tech stocks will perform.
The US election continues to trend in the direction of a Trump-Biden showdown, with Ron DeSantis stepping aside to endorse Trump’s campaign in a fast-narrowing race to become the Republican candidate. With both Ron DeSantis and Vivek Ramaswamy having both conceded within the space of a week, Nikki Haley appears to be the only major hurdle Trump has to overcome in what is increasingly looking to be a one-horse race for the GOP nomination. Markets will be aware of potential implications for foreign policy in the event of a Trump Presidency, with the Ukraine-Russia war a particular area of focus given the implications to NATO borders.
A quiet start to a busy week in terms of economic data today, with tonight’s Bank of Japan interest rate announcement marking the first of three such decisions that include the Bank of Canada, and ECB. The recent hawkish pushback from the ECB highlights a desire to dampen expectations over a swift pivot in the coming months. However, with eurozone inflation on course to fall back below 2% within months, Lagarde will soon have to begin preparing markets for a monetary loosening that will likely see them cut ahead of the FOMC and BoE. Meanwhile, the recent decline in Japanese inflation eases calls for a rate hike from the BoJ, with the bank likely to keep rates in negative territory for now.
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