ECB: rate cut expected, but not a new dawn

European equity markets

European equity markets were poised to open higher in the wake of a positive session in the US on Wednesday. Nasdaq rose nearly 2%, partly lifted by NVIDIA’s performance. The AI chipmaker's share prices rallied to record highs, taking its market valuation above the $3 trillion mark, and it overtook Apple to become the world's second-most valuable company.

The European Central Bank

The European Central Bank is widely expected to join the BOC, the SNB, and the central bank of Sweden in cutting rates before the US Federal Reserve. Economists anticipate a 25 basis-point cut across the European Central Bank (ECB) rates, which would take the main refinancing rate to 4.25%, the deposit facility rate to 3.75%, and the marginal lending rate to 4.5%. However, a rate cut today doesn't mean the beginning of a major easing cycle, as policymakers have spotted signs that inflation may prove stickier than expected in the euro area.

Australia's trade surplus

Australia's trade surplus rebounded in April as imports took a dive. Trade surplus rose to A$6.5 billion, A$1.7 billion more than the previous month, the result of a 7.2% drop in imports. Exports also fell, but by a softer 2.5% to the lowest since late 2021, with prices and volumes of iron ore and coal both easing.

The US job report

Over in the US, a couple of indicators are due at 1.30 p.m. They are initial jobless claims, expected to have climbed to 220,000 last week, and the April trade balance. Economists anticipate the trade deficit to widen to $76 billion, its highest level since October 2022. Traders are now awaiting tomorrow’s US job report. Expectations are for 185,000 job creations, and the and the unemployment rate should remain at 3.9%.

US crude oil

US crudeoil stockpiles rose across the board last week. Crude inventories unexpectedly rose by 1.2 million barrels. Oil analysts had anticipated a 2.3 million drop as refineries continued to ramp up production. Last week, production rose again to 17.1 million barrels per day, its highest since December 2019. Refinery utilization rates are now at 95.4% of total capacity, their strongest level in a year. No real surprise, then, to see gasoline stocks rise by 2.1 million barrels and distillate stockpiles by 3.2 million barrels.