Bank of England in focus as markets anticipate 25bp rate cut

• European stocks trade lower despite dovish Powell testimony.

• Bank of England in focus as markets anticipate 25bp rate cut.

• Apple, Amazon, and Intel maintain big tech earnings theme.

Mainland European markets are heading sharply lower at the open, as traders continue to weigh up the higher-than-expected headline and core eurozone CPI rates reported yesterday. Nonetheless, those hoping for a blockbuster September should feel encouraged by yesterday’s FOMC meeting, which saw Powell shift the focus back to a dual mandate that attaches greater importance to ensuring stability within the housing market going forward. With this in mind, all eyes turn to the US jobs report tomorrow, with any further signs of weakness bringing increased confidence of easing from the Fed.

Today sees markets shift their focus to the UK, with the Bank of England expected to cut rates for the first time in over four-years. With headline inflation tracking at 2%, markets are pricing in a 62% chance of a 25-basis point cut today. However, while markets are increasingly confident that the Fed will cut rates at each of the three remaining meetings of this year, it is likely to be a more considered approach from the BoE given market expectations for just two cuts in four meetings. For UK stocks, we are seeing precious little exuberance at the prospect of an impending rate cut, with the relative strength of the FTSE 100 coming down to small pockets of strength for the likes of Shell and Rolls-Royce.

Apple, Amazon, and Intel maintain the big tech focus today, with all three reporting their second quarter earnings after the close. The unforgiving environment for big tech has been highlighted by the reaction to both Alphabet and Microsoft earnings, with both stocks seeing sharp declines despite beating estimates on both the top and bottom line. With Amazon and Apple both heavily entrenched in the retail space, today’s reports will tell us plenty about the health of the US consumer in the face of elevated interest rates. For investors, the jitters seen for the Mag7 stocks look to provide an opportunity to buy-the-dip, although today’s Apple and Amazon reports will be key for those seeking to re-enter once the trade has been derisked.