Eurozone inflation heads lower, as US markets await Powell appearance

• Eurozone inflation heads lower, helping to drive stocks higher
• Taiwan earthquake could cause chip supply disruption
• US markets await Powell comments

Mainland European markets are leading the push higher this morning, as they seek to push back against the negative sentiment set throughout the US and Asia. European inflation data brought relief after both headline and core CPI fell by a greater extent than had been forecast. With CPI new standing at 2.4%, there is a strong chance that we see the ECB achieve their goal of bringing it back below 2% by the time the June meeting comes around. Core inflation remains elevated for the time being, although we look likely to see that figure deteriorate further next month.

Taiwan was rocked by its worst earthquake in 25 years today, sending shockwaves through markets as investors looked to gauge the potential implications to the economy and supply chains. Famed for its prominence as one of the world’s largest semiconductor producers, we saw TSMC shares fall as investors weighed up the possibility of disruptions to their Taiwanese facilities (accounting for 90% of TSMC production). For global tech firms, the likely factory outages for the likes of TSMC will serve as a warning sign that heavily concentrated supply chains do pose inherent risks that could impact output in the event of a major disruption like that seen today.

US traders will be treading with caution today, with an appearance from Jerome Powell posing additional risks within a week that has already been dominated by selling pressure. Comments from Fed member Mary Daly highlighted the patient approach taken by many, stating that she sees no current need for urgency to adjust the Fed Funds rate. With markets currently looking for a rate cut in June, markets will be highly sensitive to Powell’s comment as he likely uses this opportunity to shape those expectations in one way or another.