Stock markets on the rise: Watch out for inflation to set the tone for rate hikes

Investing.com - European markets start the week in the green - {Ibex 35, CAC 40, DAX... - after a busy few days with the Jackson Hole symposium.

"The president of the Federal Reserve (Fed), Jerome Powell, made it clear that the US central bank will raise its official interest rates again if inflation does not evolve as desired, a statement confirmed by the president of the ECB, Christine Lagarde, shortly afterwards", Link Securities reminds us.

So the experts point out that investors will be keeping a close eye on the macro data that will be released this week, especially those that could affect inflation.

"All the figures and indicators mentioned will be closely monitored by investors who will try to determine through their analysis how they will influence the interest rate decisions to be taken by the main central banks in September", emphasise Link Securities.

"Resilient inflation and a tight labour market could alter current market expectations that the Fed will leave rates unchanged at the September FOMC meeting. -the probability of a rate hike in November is now almost 50%-, which would be received negatively by bond and equity markets", the analysts explain.

"In the Eurozone, there is less consensus on what the ECB Governing Council will do in September with its official rates, so we think that the evolution of inflation in August, especially core inflation, could be a key factor in the decision taken by the region's central bank. If inflation proves to be more resilient than expected, we believe that the ECB will raise its benchmark rate again by 25 basis points, thus ignoring the weakness of the region's economy. If so, we could see further declines in both bond and equity markets," they add.

"In this scenario, and pending the final impact of the aggressive rate hikes on the real economy (which are already becoming apparent), our positioning remains cautious, waiting for inflation levels to allow central banks to adopt a more dovish tone," point out Renta 4 (BME:RTA4).

"In the case of Spain, and despite the potential attractiveness of the Ibex 35, the complicated political scenario could act as a drag until the situation is clarified," they add.

"The most likely scenario is that the stock markets will rebound somewhat because the tension will be on the decline. Jackson Hole did not really bring anything new. They reiterated messages already known," concluded Bankinter (BME:BKT).

Translated from Spanish using DeepL