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

Ankur Banerjee

Rising tensions in the Middle East and the return of a

higher-for-longer narrative on U.S. rates have sapped risk

appetite, sending Asian stocks tumbling, the dollar climbing to

five-month highs and leaving the fragile yen stuck at levels

last seen in the mid 1990s.

The dour mood is set to continue in Europe as bourses there

are due to open sharply lower, futures indicate. UK labour and

wage data will likely hog the spotlight as traders parse through

the reports to gauge when the Bank of England will start its

rate cutting cycle.

Markets are pricing in August as the most likely start date

for policy easing, with 49 basis points of cuts expected for the

year.

The Federal Reserve on the other hand is likely to be in no

rush to start its easing cycle after March retail sales came in

higher than expected, the latest evidence of a resilient U.S.

economy.

Markets are now pricing in less than two rate cuts this year

compared with six (yes, you read that right) rate cuts

anticipated at the start of 2024. The starting point for the

easing cycle is now September, pushed back from June, which was

pushed back from March.

Comments from Fed officials have also led traders to dial

back their expectations with San Francisco Federal Reserve Bank

President Mary Daly the latest to suggest the Fed is in no hurry

to cut rates.

"The worst thing to do is act urgently when urgency is not

required," Daly said.

The safe-haven flight to gold and dollars continued as the

world awaits word on how Prime Minister Benjamin Netanyahu would

respond to Iran's first-ever direct attack. The yen, often

sought as a safe asset, weakened further to 34-year lows as the

widening difference between U.S. and Japan rates weigh.

Meanwhile, China GDP handily beat estimates but weakness in

March data kept investors worried about the country's economic

recovery.

China will also be at the forefront of the corporate world's

mind as LVMH, the world's biggest luxury group,

reports earnings, with investors bracing for a steep slowdown in

luxury sales amid lacklustre Chinese demand.

Key developments that could influence markets on Tuesday:

Economic events: UK employment change for Feb, UK average

weekly earnings for 3 months through Feb

Earnings: LVMH, UnitedHealth ( UNH ), Johnson & Johnson ( JNJ ), Bank of

America ( BAC ) and Morgan Stanley.