Geopolitical risks, interest rate concerns, and anticipation of potentially the largest IPO in history create a mix that is unlikely to bring calm to the stock markets in the short term. The market is currently caught between hope and risk.
In addition to geopolitical risks and interest rate concerns, the AI rally is also being scrutinized. The planned SpaceX IPO could attract significant capital flows, prompting investors to question highly valued growth stocks.
Besides the publication of new US inflation data in the middle of the week, attention will also be on the ECB meeting on Thursday and thus particularly on the eagerly awaited SpaceX IPO on Friday.
New escalations between Israel and Iran – Geopolitical developments in the Middle East conflict remain dynamic
Developments in the Iran war are likely to continue to occupy investors in the coming days. Israel and Iran attacked each other again during the night from Sunday to Monday. Market participants fear that the ongoing peace talks between the US and Iran could therefore possibly be endangered. Nevertheless, the hope for a swift agreement between the warring parties is likely to prevail.
US consumer prices could surge significantly – What will the ECB do on Thursday?
Consequently, fresh US consumer price data are expected midweek (2:30 PM). The core inflation rate, which excludes the drivers of energy and food, should also be noted. This rate is considered significant, not least among the Fed's ranks, concerning inflation assessment.
Economists expect inflation in May (compared to the same month last year) to have been 4.2 percent, which is significantly higher than in April (3.8 percent). For the core rate, an increase of 0.1 percentage points to 2.9 percent is expected.
US investors are also likely to be interested in how the European Central Bank (ECB) decides on future key interest rates on Thursday afternoon (2:15 PM). The ECB press conference with President Christine Lagarde (2:45 PM) is also in focus.
The ECB could possibly adjust the deposit interest rate from its current 2.00 percent upward by 0.25 percentage points, thereby sending a signal against the inflation wave caused by the Iran war. According to a preliminary estimate by Eurostat, inflation in the euro area was 3.2 percent in May, the highest level since September 2023.
In an interview with the news agency Reuters, ECB Executive Board member Isabel Schnabel also said at the end of May: “From today's perspective, I consider an interest rate hike in June to be necessary.".
US producer prices could also provide inflation clues - Michigan consumer sentiment in focus on Friday
U.S. producer prices will be in focus on Thursday (2:30 PM), which should also provide important inflation clues.
Preliminary consumer sentiment data from the University of Michigan will round out Friday (4:00 PM).
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