European inflation climbs ahead of key ECB policy meeting


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European inflation climbs ahead of key ECB policy meeting

Eurozone inflation saw upwards momentum during May, the data coming ahead of this week’s crucial European Central Bank (ECB) monetary policy meeting. The 2.6% confirmed figure represented a rise of 20 basis points (bps) on the prior month, exceeding expectations of a 10bps increase due to an acceleration in services inflation[1]. Whilst the data is unlikely to deter the ECB from cutting rates for the first time in this cycle on Thursday, it does cast some doubts over what the pace of future easing could look like. European government bond yields moved higher on the news with German yields reaching their highest level for six months. The MSCI Europe ex UK equity index ended the week -0.4% lower in local currency terms.

It was a negative week in general for global equity markets with most major benchmarks concluding Friday in negative territory. The S&P 500 and NASDAQ retreated by -0.5% and -1.1% respectively (US dollars) with growth stocks facing the heavier selling pressure. Back in Europe, the FTSE 100 fell by -0.5% on little news whilst in Asia, the Nikkei 225 shed -0.5% (in yen). An acceleration in inflation in the Tokyo area added to growing speculation that the Bank of Japan (BoJ) could raise interest rates again shortly. As for China, the Shanghai Composite was flat as investors digested a deterioration in the nation’s manufacturing purchasing manager index (PMI) which slipped back into contractionary territory last month[2].

Moving to commodities, oil prices were little changed ahead of Sunday’s OPEC+ meeting. Brent Crude closed Friday at $81.80 a barrel, +0.1% higher for the week with OPEC+ ultimately electing to extend its production cuts into 2025 at yesterday’s gathering. Copper prices retreated from its recent record high, the metal shedding -2.9% to $9,913 a tonne although it remains some +18.0% higher over the past three months. Gold also lost ground, the precious metal declining by -0.4% to a still elevated $2,331 an ounce.

Week Ahead

MondayChinaCaixin Manufacturing PMIMay51.5051.40
 USISM Manufacturing PMIMay49.8049.20
WednesdayChinaCaixin Services PMIMay-52.50%
 EuropeFinal Composite PMIMay52.3052.30%
 UKFinal Composite PMIMay52.8052.80%
 USADP National Employment ChangeMay173K192K
ThursdayEuropeEuropean Central Bank Monetary Policy MeetingJune--
FridayChinaExports YoYMay-1.50%
 ChinaImports YoYMay-8.40%
 EuropeGDP QoQ RevisionQ1'240.30%0.30%
 USAverage Wages YoYMay3.90%3.90%
 USNon-Farm PayrollsMay180K175K
 USUnemployment RateMay3.90%3.90%

Source: Refinitiv Workspace, 03/06/24


[1] Eurostat – CPI Inflation May 2024

[2] China Federation of Logistics & Purchasing – Manufacturing PMI May 2024


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SJP Approved 03/06/2024