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European stock markets experienced a modest recovery on Wednesday, bouncing back from Tuesday’s losses, as investors eagerly awaited key regional activity data and the European Central Bank’s (ECB) latest policy meeting.
The DAX index in Germany climbed 0.4%, the CAC 40 in France rose 0.5%, and the FTSE 100 in the U.K. gained 0.3% in early trading.
PMIs in Focus Ahead of ECB Decision
The ECB is widely expected to cut interest rates by 25 basis points from their record-high levels during its meeting on Thursday. This move is supported by signs of easing inflation in Europe, with policymakers virtually guaranteeing a reduction in borrowing costs.
Citi analysts expressed optimism in a client note, highlighting that rate cuts typically provide a boost to regional equities. Additionally, they anticipate that an improving earnings outlook will further contribute to positive market sentiment.
While the rate cut on Thursday is largely a foregone conclusion, doubts remain regarding the ECB’s future rate decisions for the remainder of the year. This uncertainty stems from the slightly higher-than-expected May inflation figures for the eurozone.
Investors eagerly await the final eurozone purchasing managers’ index (PMI) data for May, which will shed light on services and manufacturing activity in the single currency area. Additionally, French industrial production data for April showed a positive rebound of 0.5% from the previous month’s decline of 0.2%.
Inditex Shines with Strong Q1 Sales
In corporate news, Inditex, the world’s largest listed fashion retailer, saw its stock price surge over 4% after reporting a 7% increase in sales and an 11% rise in net profit for the first quarter of its fiscal year.
Overall, European markets displayed cautious optimism as investors anticipated the ECB’s policy decision and assessed the latest economic data. While the rate cut is expected to provide support, the future trajectory of monetary policy remains uncertain, keeping market participants on their toes.
