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A look at the day ahead in European and global markets

By Wayne Cole, Chief Treasury Correspondent

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Share markets have started the week in a positive mood, helped in part by signs of accelerating factory activity across Asia where the private Caixin survey showed China’s main factory index hitting a two-year top.

Factory activity expanded for the first time in a year in Japan, and grew at the fastest pace in two years in South Korea. South Korean markets got an added fillip from news there could be huge reserves of oil and gas off the country’s coast.

Employees work on the production line at Jingjin filter press factory in Dezhou, Shandong province, China, Aug. 25, 2022. REUTERS/Siyi Liu

Oil prices pushed higher after OPEC+ agreed on Sunday to extend most of its oil output cuts into 2025, though some cuts will start to be unwound from October 2024.

Indian markets eyed record highs as Prime Minister Narendra Modi looks likely to expand his alliance’s majority in parliament when election results are released on Tuesday, amid speculation this would spur greater economic reform.

Analysts at BofA were bullish on the outlook, noting India’s working-age population was not set to peak until 2048 whereas it has already peaked in developed markets and China.

“We expect India to be the second biggest global growth driver for the rest of the decade and it’s the only big equity market outside of the U.S. that’s been a consistent compounder,” they said.

Graphics are produced by Reuters.

Over in Mexico, the ruling party declared Claudia Sheinbaum the winner of the presidential election by a “large margin” after polls closed on Sunday.

The main focus of the week will be on interest rates with the European Central Bank considered almost certain to trim by a quarter point to 3.75% on Thursday, the first time it would have eased ahead of the U.S. Federal Reserve.

Markets also imply around an 80% chance the Bank of Canada will cut at its meeting on Wednesday and 59 basis points of easing this year, though analysts are hopeful of easing being even deeper.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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