Deepening concern over the state of the U.S. economy and its impact on Europe will lead to further uncertainty in European stock markets next week, as investors look to interest-rate decisions from major central banks for reassurance.
A lack of clarity over even short-term market direction is leading many market participants to hold back from risky trades until economies find a firmer footing.
“In times of uncertainty not trading is a trading decision, if you can’t calculate your risk reward, sitting on the sidelines is probably best,” Steven Mayne, head of research from Montague Pitman Stockbrokers, told CNBC.com.
Both the European Central Bank and Bank of England decide on interest rates Thursday April 10, with the ECB widely expected to hold rates steady at 4 percent in the hope of stifling rampant prices rises.
“The ECB will leave interest rates unchanged,” Otmar Lang, head of research at Citigroup Private Banking, said, adding a cut is possible as early as June.
ECB President Jean-Claude Trichet is unlikely to give away any clues about future monetary policy when he answers press questions after the decision, Lang said, but if he did hint at a rate cut, the euro could weaken against the dollar.
Meanwhile, the Bank of England is expected to cut rates by 25 basis points, as Mervyn King and the rest of the Monetary Policy Committee attempt to help the UK economy in the face of slowing growth.
Also on the agenda next week is final fourth-quarter gross domestic product data for the euro zone, the European Monster Employment Index, earnings from the likes of mining giant Rio Tinto and the World National Oil Congress in London.