The ECB is looking to revive the Eurozone economy with its first rate cut in five years expected today

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.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.5% yesterday on turnover of SAR 8,1 bn. The index is down -3.5% YTD.

In the green: Fakeeh Care (+10.1%), AWPT (+4.2%) and Ades (+3.2%).

In the red: Cenomi Retail (-5.3%), Sisco Holding (-5.1%) and Medgulf (-5%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.4% yesterday on turnover of SAR 33.7 mn. The index is up 5.7% YTD.

In the green: Bena (+9.1%), Riyadh Steel (+6.9%) and Lana (+6.4%).

In the red: Future Care (-5.6%), Apico (-4.9%) and Group Five (-4.7%)