European Stocks Retreat ahead of ECB Decision to Confirm Rate Hike in July

Investors pulled back on European stocks ahead of the European Central Bank (ECB) decision later today as the bank would confirm its intention to raise interest rates next month after Eurozone inflation hit a record high in May at 8.1%.

German DAX fell 0.67%, UK FTSE decreased 0.54%, France CAC slipped 0.16%, Eurozone Stoxx 600 dropped 0.60%.

Meanwhile, Wall Street pointed to open higher on Thursday with Dow Jones Futures rose 0.24%, S&P 500 Futures gained 0.29% and Nasdaq Futures increased 0.35%.

Thailand’s SET Index gained 0.40% just before the closing on Thursday.

According to ECB’s forward guidance, the possible rate hike would only come in July as the central bank will first need to formally end its net asset purchases, despite high inflation rate knocking at their doors.

Reuters Poll indicated a 25 basis point rate hike in July, however, some economists are open to a 50 basis point. The poll expected another hike by 25bps in 4Q22 and another hike in 1Q23 before pausing in 2Q and one more hike in 3Q23.

The ECB is also expected to downgrade its growth forecasts and revise up its inflation forecast to reach 2% by 2024.