Markets brace for BOE as China PMI cheers
The Bank of England is expected to raise interest rates on Thursday, as investors look for signs of how sticky inflation has become in the UK.
The BOE is widely expected to hike rates by 25 basis points, taking the benchmark rate to 5.25%. This would be the fifth consecutive rate hike, and would bring the UK’s monetary policy stance more in line with other central banks, such as the US Federal Reserve.
Inflation in the UK has been running at a 40-year high, reaching 9% in April. However, there are some signs that price pressures may be starting to ease. In June, inflation fell to 9.1%, and there are expectations that it could fall further in the coming months.
However, the BOE will be wary of being too complacent about inflation. The war in Ukraine and the ongoing COVID-19 pandemic are both creating headwinds for the global economy, and could push up prices further.
In addition to the BOE rate decision, investors will also be watching earnings reports from Apple and Amazon. Apple is expected to report strong earnings, but Amazon’s results could be more mixed.
Elsewhere, China’s services PMI came in better-than-expected, giving markets a bit of good news after disappointing data on Monday. However, Chinese real estate stocks were under pressure after shares of Evergrande’s property services arm re-opened following a 16-month halt with a steep drop of nearly 50%.
Here are some key developments that could influence markets on Thursday:
- BOE monetary policy decision, UK July reserves balance
- Apple, Amazon, Block, Booking Holding, Airbnb, Expedia, Stryker, Cigna; Rolls-Royce, Infineon, Adidas AG, BMW
- Euro zone June PPI
- Germany June trade balance
- France June budget balance
- US initial jobless claims, Q2 productivity and labour costs, June factory orders
- US, Italy, France, Sweden, Spain, France, Germany, Euro Zone, UK July service PMI, Fed’s Barkin speaks
Overall, markets are expected to be cautious on Thursday ahead of the BOE rate decision and other key economic data. However, there are some positive signs that inflation may be starting to ease, which could provide some relief for investors.