FX.co ★ European Shares Likely To Open On Soft Note Before US Inflation Data

European stocks are set to open on a lackluster note this Wednesday, following a highly anticipated debate between Donald Trump and U.S. Vice President Kamala Harris that yielded minimal policy specifics on key topics such as immigration, foreign policy, and healthcare.

Asian markets declined, with Chinese, Hong Kong, and Japanese exchanges leading regional downtrends. Concerns linger over the health of the Chinese economy, and the yen surged to an eight-month high after hawkish remarks from Bank of Japan board member Junko Nakagawa.

Attention is now shifting to the U.S. consumer price inflation data due later today, which is expected to provide fresh insights into the Federal Reserve's interest rate strategy.

There is considerable uncertainty regarding the scale of the rate cut in next week's Federal Reserve meeting. Markets are currently pricing a one-in-three chance of a 50-basis point cut, with expectations of 114 basis points of easing throughout the year.

The European Central Bank is anticipated to reduce rates again on Thursday, likely preceding the Federal Reserve's move.

Key economic data from the U.K., including the GDP estimate for July and both industrial and manufacturing output figures for the same month, may also influence market sentiment as the trading day progresses.

The U.S. dollar weakened, while gold saw a slight increase due to a prevailing risk-off sentiment in global financial markets.

Oil prices rose by approximately 0.5% after plunging to their lowest levels in over a year the previous day, driven by demand concerns. OPEC on Tuesday revised lower its forecast for global oil demand growth in 2024 and also adjusted its expectation for the following year, marking two consecutive downward revisions from the producer group.

U.S. stocks experienced volatility before closing mixed on Tuesday, ahead of the Harris-Trump debate and the upcoming CPI inflation report for August.

The tech-heavy Nasdaq Composite gained 0.8%, and the S&P 500 edged up by 0.5%, achieving back-to-back gains. In contrast, the Dow dipped 0.2%, weighed down by plummeting oil prices nearing three-year lows and a series of cautious comments from prominent American bank executives.

European markets closed lower on Tuesday, with banks and energy stocks pulling the indices down.

The pan-European STOXX 600 dipped 0.5%, the German DAX fell by 1%, France's CAC 40 slid 0.2%, and the U.K.'s FTSE 100 shed 0.8%.