SNB cut rates as eyes turn to the Bank of England

• European markets on the rise as Luxury brands help lift the CAC
• SNB cuts rates once again
• Bank of England in view, with services inflation hampering rate cut hopes

European markets are seeing some welcome respite from the selling pressure that has dominated much of the week thus far. In France, investors are starting to take advantage of the value being offered for some of the top international names, with political concerns bringing selling pressure that has helped provide luxury stocks at discount prices. The gains seen in early trade for LVMH and Hermes serve to highlight the demand that will likely remain for big international brands despite domestic French concerns. Meanwhile, the US market returns from its Juneteenth holiday to find Nvidia looking to extend its new lead amid a 3.5% pre-market gain for the tech giant. That 3.5% gain would see Nvidia add another cool $117 billion in market cap, highlighting another likely day of outperformance for the Nasdaq and S&P 500.

The central banks influence is in full effect today, with the Bank of England in view after a PBoC rate hold and SNB rate cut. The PBoC had largely been expected to keep rates on hold despite concerns over the direction of the economy, with recent industrial production and new home price data highlighting the need to provide support where possible. However, it was the SNB which grabbed the headlines, cutting rates for the second time in as many meetings. With Swiss inflation standing at 1.4%, the bank remains in a position to ease further if need be, with the CHF falling sharply in the wake of today’s meeting.

Looking ahead, the Bank of England provide the main event of note for European traders, with the MPC having to weigh up just how long they wish to hold off before pulling the trigger. With inflation back down to the 2% target, the justification for keeping rates at a restrictive sixteen-year high of 5.25% will be questioned by many. Nonetheless, the fact that UK services inflation remains at a lofty 5.7% will not be lost on BoE members, with core inflation remaining well above target at 3.5%. Despite yesterday’s drop down to 2% for UK inflation, markets have in fact largely written off a rate cut today, instead looking for the first move to come in September.