FX.co ★ European Shares Seen Lower As Investors Brace For US Inflation Data

As forecasted, European stocks are likely to see a dip this Monday as investors wait for significant U.S. data expected this week that could provide further insight into the Federal Reserve's path. In particular, the U.S. consumer and producer price inflation data, market reports on retail sales, industrial production and consumer sentiment are anticipated to be the main factors in focus this week.

At present, the market is predicting three to four quarter-point U.S. interest rate cuts, with a 75 percent probability of the first of these cuts occurring in June. There's a mixed response in the Asian market, with a substantial drop of almost 3 percent in Japan's Nikkei average due to the yen's steady increase against the dollar thanks to the Bank of Japan's bullish discourse.

On the contrary, the GDP of Japan in the last quarter was slightly elevated, predicting the termination of the Bank of Japan's negative interest rates in the upcoming meeting next week. Markets in China and Hong Kong rose following the revelation that the country's consumer prices had increased for the first time in six months in February, alleviating fears that deflation may become deeply rooted.

However, despite consumer prices witnessing an increase, producer prices continued to dwindle for the 17th consecutive month. As the fate of the dollar index hangs in the balance, gold reached a new record high, trading at over $2,180 per ounce due to predictions that upcoming Tuesday's U.S. inflation data will illustrate a further decline in core prices.

Ahead of reports from OPEC and the IEA this week that could offer insights into the demand outlook, oil prices also witnessed a minimally lower trend in Asian trading. The U.S. stock market faced a setback last Friday, influenced by the ambiguous signals offered by February's job data on economic and rate prospects.

Despite the job creation surpassing expectations, the upward revision in the unemployment rate to 3.9 percent, coupled with slower wage growth and significant downward adjustments to previous month's job growth, were causes for concern. An unexpected rise of 275,000 jobs was reported in February's non-farm payroll employment, against economists' projection of a 200,000 job increment.

The previous December and January figures were revised downward by a total of 167,000 jobs. The Nasdaq Composite, dependent on technology stocks, faced a 1.2 percent setback, followed by the S&P 500 and the Dow, marked by a 0.7 percent and 0.2 percent decline respectively. The European stocks also showed varied responses last Friday, despite the Eurozone GDP remaining unchanged at the end of 2023.

The predominant STOXX 600 of Europe ended on a high note, whereas the German DAX and the U.K.'s FTSE 100 witnessed a dip of 0.2 and 0.4 percent respectively. In contrast, the French CAC 40 saw an upward shift of 0.2 percent.