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Notes from the Trading Desk – Europe

The Bank of Australia holds its policy meeting on Tuesday and markets anticipate its key interest rate will be lifted by 25 bps after a four-month pause. It could prove an interesting contrast versus the picture developing elsewhere, as the European Central Bank, Fed and BoE all remained on hold at recent meetings.

Notes from the Trading Desk – Europe

Equity markets ended the first half of the year on a largely positive note, as investors shrugged off hawkish central banker comments. This week, markets will have an eye on the Australian central bank interest-rate decision and the minutes from the last Fed meeting, which will be released Wednesday.

Notes from the Trading Desk – Europe

In terms of seasonality, April has historically been a strong month. The one theme we keep coming back to is the recent inflows into global money market funds.

Notes from the Trading Desk – Europe

Banks remain the clear focus, with a consistent message that the risk of contagion appears relatively low for now. Investors are now questioning where there is exposure to the commercial real estate market.

Notes from the Trading Desk – Europe

The key focus for this week will be the European Central Bank (ECB) meeting on Thursday, with a 75 basis point interest-rate hike expected. ECB President Christine Lagarde will also speak, likely to reiterate that quantitative tightening will begin after interest-rate normalisation has completed. The US GDP report on Thursday will also be closely watched. Earnings season gets into full swing this week, so focus will be on corporate reporting.

Notes from the Trading Desk – Europe

Despite the strength in the market overall, a number of headwinds persist for European corporates, and one area of focus is the Rhine river water level, which continues to drop. This could have the potential to restrict the transportation of goods through central Europe, at a time when the continent is already suffering the worst energy crisis in decades.

Notes from the Trading Desk – Europe

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. The European desk is manned by eight professionals based in Edinburgh, Scotland, with an average of 15 years of experience whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.