The illustration taken on June 25, 2021 shows broken glass in the U.S. dollar and euro banknotes. REUTERS Dado Ruvic Illustration
After U.S. GDP came in at an annualised 6.9%, the highest since 1983, could Europe go one better? France released data showing the economy expanded at the strongest rate in 52 years in 2021, at 7%. Sweden beat expectations at 6.4%. German growth is expected to be more sedate at 2.7%.
The euro, headed for its biggest weekly loss against the dollar since June, could fall below $1.11 for the first time since mid- 2020, and could drop below $1.11 for the first time since mid- 2020. The dollar's index has been boosted by a 2% boost this week due to the promise of an aggressive Fed rate rise campaign and a slew of buoyant economic data.
The reasons for the U.S.-Europe split can be seen in real bond yields. After stripping out inflation effects, U.S. 10 year yields now stand at minus 0.5%, double end 2021 levels, while Wall Street ended with losses on Thursday. Apple AAPL.O posted record holiday-quarter sales, having skirted the supply chain problems that have bedevilled rivals. With the world's biggest company down nearly $400 billion from peak value, more buyers are expected to emerge, if shares jumped 5% after-hours.
Aside from European growth, markets will wait for the Fed's favoured inflation gauge, the U.S. PCE, to see if price growth is peaking. Expectations were for a pick-up to 4.8%, which would be the highest reading since 1983.
After a bounce across Asia, futures are again pointing north in the direction of stock markets. Europe seems to be more resilient and has managed to end firmer on Thursday. The pan-European STOXX index is down 3.5% this year -- 9% at the S&P 500, while Britain's FTSE is actually in the green.
Key developments that should give more direction to markets on Friday: