Proactive Investors -
- FTSE 100 up 12 points at 7,691.
- Nationwide to buy Virgin Money (LON:VMUK).
- Gold hits new high again.
ECB also lowers GDP forecast
Central bankers in Europe also lowered forecasts for gross domestic product (GDP) growth on Thursday.
The Eurozone will now likely grow by 0.6% this year, compared to previous forecasts for 0.8%.
Stronger growth will return in 2025 and 2026 though, the ECB said, as GDP climbs 1.5% and 1.6% respectively, “supported initially by consumption and later also by investment”.
ECB leaves interest rates unchanged
The European Central Bank has left its main interest rate unchanged at 4%, as anticipated by the markets.
Inflation forecasts were revised downward though, setting the stage for future rate cuts.
A fall in energy prices in particular means the bank anticipated average inflation to sit at 2.3% for 2024, 2.0% in 2025 and 1.9% in 2026, a Thursday statement read.
“Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages,” the ECB said.
“Financing conditions are restrictive and the past interest rate increases continue to weigh on demand, which is helping push down inflation.”
Gold hits another record
Gold hit yet another high on Thursday morning, climbing to US$2,161.48 after assurances that US base rates could come down this year from Federal Reserve chair Jerome Powell.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year,” he told lawmakers on Wednesday.
“But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured.”
The yellow metal’s most recent climb takes gains to around 9% since mid-February, with Finalto’s Neil Wilson noting a weaker dollar and demand from central banks were buoying the price.
A “primary driver [...] is a continued decline in real yields” as inflation expectations cool, SP Angel analysts added, “pushing buyers into gold from money market accounts and Treasuries”.
US stocks called higher at the open
The Nasdaq is expected to lead gains as US markets open higher on Thursday following reassurances that rate cuts are likely to take place this year.
Futures had the Nasdaq adding 67 points to hit 18,111 on Thursday’s opening bell, while the Dow Jones and S&P 500 were expected to tick up by 37 and 10 points respectively to 38,743 and 5,122.
This follows gains seen on Wednesday, after Federal Reserve chair Jerome Powell told lawmakers that rate cuts were still likely this year.
That said, jobs data is a “concern” for the wider economy, as per Finalto’s Neil Wilson, with Friday set to bring the week’s key non-farm payroll report.
“Falling real income, weaker disposable spend, high borrowing costs and depletion of savings generated during the pandemic is going to weigh later this year,” he said.
Among equities, New York Bancorp grabbed headlines on Thursday morning with news the troubled bank was set to receive US$1 billion through a capital raise.
Victoria’s Secret plummeted nearly 30% in pre-market trading meanwhile, after the chain unveiled weak first-quarter sales guidance on Wednesday evening.
And finally, Tesla shares continued a week-long losing streak ahead of the market’s opening, after Elon Musk’s firm was dealt a downgrade by Morgan Stanley (NYSE:MS).