Morning News: Pride and caution expected in UK budget

A look at the day ahead in European and global markets from Ankur Banerjee

The relief in the market will be tested when Chancellor of the Exchequer Jeremy Hunt presents the UK Spring Budget as he tries to speed up the world’s sixth largest economy, with business lobbies clamoring for sweeteners.

Hunt, drafted in last year after former prime minister Liz Truss’ September mini-budget rocked UK markets, is due to speak at 1230 GMT and is expected to stay away from major tax cuts or spending increases.

That could increase risk appetite among investors after the relief rally on Wednesday got a leg up from China’s economic activity data that showed a gradual but uneven recovery. Rising expectations that the Fed will not go back to jumbo hikes after Tuesday’s inflation numbers also helped lift sentiment.

The market is now pricing in about an 80% chance of a 25 basis point increase compared to last week when it priced in a 70% chance of a 50 bps increase. Some in the market still hope that the Fed will remain on hold on interest rates. Retail sales data later in the day will shed more light on the state of the economy.

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European stocks may struggle to hold on to gains with futures indicating the market is headed for a slightly higher open.

Bank stocks clawed back some of their steep losses as traders bet (or hope) that the worst of the SVB fallout is over as contagion fears that gripped the market eased.

In business, the focus will be on Credit Suisse after the Swiss bank said it had identified “material weaknesses” in internal controls over financial reporting.

Meanwhile, Facebook parent Meta Platforms announced it would cut 10,000 jobs this year, making it the first Big Tech company to announce a second round of layoffs.

Reuters graphics

Key developments that could affect markets on Wednesday:

Economic events: Inflation data for Sweden and France

Eurozone industrial production data; UK budget

Reporting by Ankur Banerjee; Editing by Muralikumar Anantharaman

Our standards: Thomson Reuters Trust Principles.

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