Markets remain muted ahead of central banks' meetings next week

Ahead of next week's crucial central bank meetings, European stock markets traded largely unchanged Thursday. Amidst uncertainty over the global economic outlook, traders sought out the US dollar as a safe haven in early European trade Thursday. Several senior bank executives have predicted that tightening monetary conditions will likely result in a global recession in 2023, leading European investors to refrain from engaging in any significant activity on Thursday as the week approaches the end.

Markets seem to be returning to a macro-led environment where the 2023 global slowdown is front and centre after a positioning-driven rally over the past six weeks.

In anticipation of the US Federal Reserve's policy-setting meeting next week, investors expect the central bank to slow its tightening pace, likely by 50 basis points after four consecutive increases of 75 basis points.

Despite the recent strength of US employment, services, and factory data, investors remain uncertain about the policy outlook ahead of Friday's PPI report and next week's all-important CPI number.

There has been growing concern recently among the heads of several big banks about the possibility of a recession, primarily in the U.S., with the likelihood that interest rates will peak at higher levels than expected if inflation continues to remain constrained.

Next week, the US Federal Reserve and European Central Bank will hold a series of policy-setting meetings, and both of these central banks are expected to raise interest rates in response to rising inflation.

Although the ECB is expected to follow the Fed with a rate hike of 50 basis points, there is a hawkish group within Europe's main central bank that wants to raise rates for a third time by 75 basis points, even though Eurozone inflation fell for the first time in 18 months.

As for the European economic calendar on Thursday, there is not much on it. However, it is critical to pay close attention to the appearances of several central bank leaders, including the president of the ECB, Christine Lagarde.

Oil surged on surprising US inventories change

The price of crude oil rose Thursday after it fell to its lowest level this year, although gains are tentative due to concerns about a global economic slowdown that are rising. The oil market received a boost Wednesday after data released by the US Department of Energy showed that US inventories shrank by more than expected last week. As well as this, China's recent decision to loosen more of its COVID mobility restrictions also contributed to the improvement in sentiment. Despite this, concerns regarding the growth of crude oil demand, particularly in the US market, which is the world's largest consumer of crude oil, continue to dominate the market.

Gold rebounded cautiously

A rebound in gold prices was seen during the initial hours of Thursday's Asian session as market players lashed out after a negative start. Recent risk-off sentiment may be due in part to China's headlines, which have helped the US Dollar to approach a winning week.