Market Focus: Rate Decisions and Earnings Updates
A look at the day ahead in European and global markets from Rae Wee
Investors in Europe will wake up to an action-packed Thursday spanning a rate decision from the Bank of England (BoE) and a flurry of corporate earnings, alongside any news from U.S. President Donald Trump that could reignite market volatility.
The BoE is all but certain to cut interest rates later on Thursday, though that would only mark its third since just after the start of the COVID-19 pandemic in 2020, as it juggles the need to help the sluggish economy with still-strong inflation pressures.
The focus, though, will be on the outlook for UK rates, particularly as investors have loads to fret about - from finance minister Rachel Reeves' tax increases for employers, the risk of a global trade war led by Trump, and rising costs. The British economy has barely grown since mid-2024.
Markets have priced in more than 80 basis points worth of easing by the year-end, so it remains to be seen whether policymakers will cement those expectations or push back against them.
Mexico's central bank also announces its rate decision later in the day, where it is likely to deliver a 50 basis points cut, as inflation cools and the economy notched a slight contraction late last year.
In other central bank news, Federal Reserve Vice Chair Philip Jefferson said he is content to keep the central bank's policy rate in its current position until more clarity on the Trump administration's policies emerges.
Still, U.S. Treasury yields languished near their lowest in over a month on Thursday, on the back of mixed U.S. economic data and as investors seek safety amid uncertainty about Trump's tariff policy and the prospect of escalating trade wars.
In contrast, Japanese government bond yields jumped and the yen strengthened on more comments from Bank of Japan officials supporting the case for further rate hikes there.
It's also a busy day on the earnings front, with those of Amazon's in focus.
The pressure is on Amazon.com to deliver on lofty expectations for cloud computing in its fourth-quarter results, after lacklustre reports from Microsoft and Alphabet jolted investor faith in Big Tech's multibillion-dollar investments in AI.
Options pricing shows markets are hedging for a share price move of up to 8% either way on the results.
Investors will also be on the lookout for what company executives say about Trump's closure of the "de minimis" exemption for package imports valued under $800.
The move should theoretically be positive for Amazon since it hurts Chinese competitors.
In Europe, L'Oreal's earnings will be another litmus test for Chinese consumer spending, though dismal duty-free spending in China's island province of Hainan could be a foreshadowing of disappointing results.
Key developments that could influence markets on Thursday:
- Bank of England, Bank of Mexico rate decisions
- Amazon earnings release (Q4 2024)
- AstraZeneca earnings release (Q4 2024)
- Carlsberg earnings release (FY 2024)
- L'Oreal earnings release (FY 2024)
- U.S. weekly jobless claims
(Editing by Muralikumar Anantharaman)
