Early Morning Call: Euro indices expected lower; inflation in focus; Novavax down 16%

Global concerns about growth affecting markets

The overarching theme for the markets remains the global concern about growth.

With bond yields rising in almost all western economies, central banks are having to take action, leading to traders choosing to avoid risk assets.

Volatility is coming off the biggest move up since 18 May with technology stocks leading losses in the US. Novavax plunged 16% on a report of possible further delays to its Covid-19 vaccine clearance, while Moderna shares also fell heavily. Amazon, Netflix, Coinbase and NIO were among the worst performers. All these stocks are all-sessions on the IG platform and can be traded from 9am.

Nikkei follows poor US lead

In Japan, the Nikkei followed this poor US lead, falling back to a one-week low. China mainland and Hong Kong outperformed the region, as consumer price index (CPI) in China rose by 2.1% in May from a year ago, just below expectations of a 2.2% increase.

Factory gate prices were in line with expectations at 6.4% year-on-year (YoY), cooling down to a 14-month low. Hit by Covid-19 restrictions, the world’s second largest economy has slowed significantly in recent months, alongside demand for steel, aluminium and other key industrial commodities.

Australia’s ASX 200 edged lower on the news, completing a week of daily losses and recording its worst weekly performance since January.

European outlook

In Europe, indices follow suit.

The FTSE 100 and DAX are on track to record their worst weeks since the beginning of the Ukraine war.

The main macro-economic event of the day will be the publication at 1.30pm of consumer price index in the US. Economists forecast a rise of 8.3% in May YoY, same pace as in April.

Core CPI rise is anticipated to decelerate to 5.9%, after 6.2% recorded in April, which would be a second straight month of decline for this indicator. The euro is relatively stable this morning after losing ground yesterday.

While considering that inflationary pressures have increased, the European Central Bank (ECB) failed to surprise the markets, saying a 25 basis point (bps) is on the cards for July, and confirming the end of the net asset purchase programme on 1 July.

Enery price rally

The rally in the price of energy is marking a pause, after new lockdown restrictions were imposed yesterday in parts of Shanghai.

US crude oil is back below $120 after setting a new 13-week high earlier this week. Investors are awaiting the Baker Hughes oil rig count published at 6pm. Oil and gas rig in operations have failed to increase in the previous two weeks.