European Stock Futures Lower; Inflation Releases Loom Large

  • Stock Market News
European Stock Futures Lower; Inflation Releases Loom Large
Credit: © Reuters.

By Peter Nurse - European stock markets are expected to open lower Monday, with investors taking a cautious stance at the start of a week that includes a U.S. inflation report that could point to another substantial interest rate hike.

At 02:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 1.2% lower, CAC 40 futures in France dropped 1.5%, and the FTSE 100 futures contract in the U.K. fell 0.7%.

European indices closed higher Friday, rebounding after the sharp sell-off in the first half of the year, but this positive tone is under threat at the start of the new week ahead of the release of the latest set of CPI reports from a number of countries, primarily the U.S.

French , German , and Spanish CPIs are all expected to stay at or near record levels, while the U.S. consumer price index is expected to show an 8.8% year over year increase and a 1.1% month over month increase. These numbers would be accelerations from last month’s numbers, with the cost of energy seen as the main driver.

In combination with Friday’s strong nonfarm payrolls release, this will continue to hold the Federal Reserve’s feet to the fire, pointing to another interest rate hike of 75 basis points which is likely to have an impact on global growth.

The second-quarter earnings season also kicks off this week, with U.S. banks leading the way. 

Ahead of that, Danske Bank (CSE: DANSKE ) will be in the spotlight after it reduced its full-year net profit outlook on Sunday, hurt by rapidly rising interest rates and unfavorable financial market conditions.

French power utility EDF (EPA: EDF ) will also be in focus after the French government announced over the weekend that it would fully nationalize the debt-laden company. EDF, in which the state already has an 84% stake, is one of Europe's biggest utilities and is central to France's nuclear strategy.

Oil prices edged lower Monday as fresh COVID concerns in Shanghai raised fears of new lockdowns and a hit to demand from the largest importer of crude in the world.

The highly-transmissible BA.5 Omicron variant was discovered in China’s commercial hub over the weekend, prompting another round of mass screening from Tuesday to Thursday.

While the authorities will be keen for any curbs to be as targeted as possible to reduce damage to the world's second-largest economy, this news does bring back memories of the prolonged lockdowns earlier in the year which clogged global supply chains and hit international trade. 

By 02:05 AM ET, U.S. crude futures traded 1.2% lower at $103.50 a barrel, while the Brent contract fell 1% to $105.97. 

Both contracts posted weekly declines last week as the market was worried that aggressive interest rate hikes would spark a recession and dent oil demand.

Additionally, gold futures fell 0.2% to $1,738.35/oz, while EUR/USD traded 0.4% lower at 1.0143.

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