EU Stoxx 50, Central Banks, Federal Reserve, European Central Bank, Inflation – Talking Points
- EU Stoxx 50 declines ahead of FOMC on Wednesday; ECB, BoE on Thursday
- This week will also see the release of key retail sales, inflation data
- Expectations continue to grow over announcement of faster Fed taper
The EU Stoxx 50 closed lower on Tuesday as market participants jostled ahead of a pivotal slate of central bank meetings this week. Tuesday’s decline was the 4th down session in the last 5, as uncertainty over Omicron and monetary policy continues to linger over markets. The Federal Reserve began its two-day policy meeting on Tuesday, with the central bank widely expected to begin discussing a faster taper of asset purchases. This potential policy move has put market participants on edge, as it could represent another step closer to interest rate hikes in the United States.
Key Upcoming Economic Events
Later this week, the Bank of England and the European Central Bank will release their respective policy statements to round out a big week of risk events. The Bank of England surprised markets at its last policy meeting by electing not to raise interest rates despite rampant inflation. The central bank may choose to hold off on a rate hike yet again, as the country struggles with the spread of the Omicron variant. UK Prime Minister Boris Johnson revealed on Monday that the first death from the Omicron variant in the UK was recorded.
EU Stoxx 50 Index Daily Chart
Chart created with TradingView
The European Central Bank (ECB) will follow the Bank of England on Thursday, with the ECB sounding more dovish of late than other G10 central banks. While the ECB may announce an alteration to its pandemic emergency purchase program (PEPP), policymakers may choose to remain dovish as the continent struggles with Omicron. The reemergence of lockdowns and rising infection rates could hamper Eurozone growth, which could force the ECB to remain dovish for the near-term. An accommodative ECB could boost risk assets, EU Stoxx 50 included. Despite the potential of a significant divergence in central bank policy, European equities could shine as the ECB continues to keep the proverbial punch “bowl out” for market participants.
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— Written by Brendan Fagan, Intern
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