A look at the day ahead in European and global markets from Rae

Wee

European markets will be waking up to a fairly quiet session

with London closed for a holiday and little on the economic

calendar to stand in the way of the latest rate-cut rally.

Investors will be hoping the rise in risk appetite following

Federal Reserve Chair Jerome Powell's relatively dovish steer on

the U.S. interest rate outlook continues this week, after Wall

Street and the MSCI World index hit three-week highs on Friday.

The MSCI Asia ex-Japan index on Monday climbed to its

highest since February 2023 while mainland stocks in China got

off to a solid start after returning from the extended Labour

Day break, in a sign that fragile investor sentiment is finally

turning.

Even the long wait for a solid rebound in the Chinese

economy seems to be bearing fruit, with a private gauge showing

the country's services activity expanded, albeit at a slower

pace. Growth in new orders accelerated and business sentiment

rose solidly last month.

Elsewhere, U.S. earnings have, on the whole, been strong and

company guidance generally bullish, the Fed appears reluctant to

raise rates again and signs of softer economic data are keeping

hopes of rate cuts this year alive.

Global and emerging market financial conditions eased

significantly last week, and are now the loosest since March 22,

Goldman Sachs' financial conditions indicators show.

A slew of Fed speakers are on the docket this week, and

investors betting on an eventual rate-easing cycle this year

expect policymakers to sing from the same hymn sheet as Powell

after Friday's benign U.S. jobs report.

And while lower U.S. rates would ease the pressure on most

other currencies, over in Japan, that would only have a

miniscule impact given stark interest rate differentials are

likely to remain.

The yen was back on the back foot on Monday after last

week's suspected intervention from Japanese authorities, which

sent the currency swinging roughly eight yen in the span of a

week.

Market participants bet last week's moves are not the last

we've seen of the Japanese authorities' preference for striking

during hours of thin liquidity. That could make Monday's Europe

session an opportune time for yet another round of yen buying.

Key developments that could influence markets on Monday:

- Germany HCOB services PMI (April)

- France HCOB services PMI (April)

- Euro zone producer prices (March)

(Editing by Jacqueline Wong)