ECB set to cut rates today, aiming to boost Eurozone: Economists see the European Central Bank (ECB) cutting interest rates today for the first time in five years. A 25 bps cut is likely in the cards now, but analysts wonder how much further the ECB can go: The economy needs the relief rate cuts offer, but inflation remains “stubbornly” high, the Financial Times reports.

Recovery is afoot: A downward path for rates will “breathe life” into the eurozone’s housing markets, push businesses to borrow more to fund investment, and boost consumer spending, Holger Schmieding, chief economist at German bank Berenberg told the salmon-colored paper.

The downside risk: Move too fast while inflation is high and wages are growing quickly, and the ECB will just fuel more inflation.

The consensus? A symbolic cut today, but none in July. Persistent inflation in the Eurozone — it rose to 2.6% in May — won't stop the ECB from cutting interest rates, but “it is unlikely that the ECB will move with another cut in July,” Jack Allen-Reynolds, an economist at Capital Economics, told FT last month. Economists polled by Delano concurred that the ECB will hold rates steady in July.

“Markets have almost fully ruled out a July cut, and now only see around two cuts in total by year-end. As things stand, we believe an ECB cut this week may soon be viewed as a policy mistake,” Gabriele Foa, a portfolio manager at Algebris Investments, told Bloomberg.

A policy mistake? A cut today would mark the first time Europe diverges from the United States in five years, potentially backfiring as the ECB lowers the interest rates ahead of the US Federal Reserve, Mathilde Lemoine writes for the Financial Times. The rate cut is expected to weaken the EUR, possibly causing a surge in import prices, including energy imports, which might prevent businesses from investing in the short-term.

The longer the Fed waits to push ahead with cuts, “the more difficult it can be eventually for the ECB,” Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management told the New York Times.

MARKETS THIS MORNING-

Asian markets are all in the green this morning as traders welcome both the prospect of the ECB’s rate cut and the Bank of Canada’s cut yesterday. All major Asian benchmarks we follow are in the green, with the Nikkei (+1.1%) and the Kospi (+1.0%) leading the way. European stock futures are all solidly in the green this morning and Wall Street futures inched up overnight after the S&P 500 closed at another AI-fuelled (or maybe “Nvidia-fuelled”?) record high yesterday.

EGX30

26,634

-1.3% (YTD: +7.0%)

USD (CBE)

Buy 47.56

Sell 47.70

USD (CIB)

Buy 47.57

Sell 47.67

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

11,553

-0.5% (YTD: -3.5%)

ADX

8,948

+0.3% (YTD: -6.6%)

DFM

3,980

-0.1% (YTD: -2.0%)

S&P 500

5,354

+1.2% (YTD: +12.3%)

FTSE 100

8,247

+0.2% (YTD: +6.6%)

Euro Stoxx 50

5,036

+1.7% (YTD: +11.4%)

Brent crude

USD 78.41

+1.2%

Natural gas (Nymex)

USD 2.75

-0.1%

Gold

USD 2,374

-0.1%

BTC

USD 71,149

+1.0% (YTD: +68.3%)

THE CLOSING BELL-

The EGX30 fell 1.3% at yesterday’s close on turnover of EGP 3.6 bn (25.2% below the 90-day average). Local investors were net sellers. The index is up 7.0% YTD.

In the green: Palm Hills Development (+1.8%), E-finance (+0.7%), and Edita (+0.1%).

In the red: Abu Qir Fertilizers (-4.9%), Sidi Kerir Petrochemicals (-4.8%), and Egypt Kuwait Holding -EGP (-3.7%).

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