European Stocks Lower; German Factory Orders Point to Contraction

  • Stock Market News
European Stocks Lower; German Factory Orders Point to Contraction
Credit: © Reuters.

By Peter Nurse - European stock markets traded lower Tuesday on signs of economic slowdown ahead of a European Central Bank meeting that could signal monetary policy tightening.

By 4 AM ET (0800 GMT), the DAX in Germany traded 0.7% lower, the CAC 40 in France fell 0.5%, and the U.K.’s FTSE 100 dropped 0.1%.

Data out of Germany, the Eurozone’s largest economy, showed incoming orders to the country’s factories fell for a third month in a row in April, pointing to at least one quarter of economic contraction.

Orders fell by 2.7% on the month, following on from declines of 4.2% and 0.8% in the previous two months. The numbers fell well short of expectations for a bounce of 0.3%, and are the latest evidence of a sharp slowdown in Germany in response to Russia’s invasion of Ukraine, which has triggered steep rises in energy costs.

These sharp price rises have put Thursday’s meeting of the European Central Bank firmly into focus. The ECB is widely expected to use this get-together to make clear that rate hikes will be coming in the third quarter, and tightening expectations have been lifted by the hawkish 50 basis point hike by Australia’s central bank earlier Tuesday.

U.K. equities outperformed Tuesday after Prime Minister Boris Johnson survived a vote of no-confidence from his own lawmakers, and vowed to “get on with the job” by setting out a raft of new policies.

However, he now faces a tricky battle to win back the confidence of his party and country after months of scandal over lockdown-breaking parties at the heart of government.

U.K. services PMI data will be studied later in the session, but the week’s main economic release will be the May U.S. CPI report, due on Friday, as this will act as a key input before the Fed decides how much to hike rates next week.

In corporate news, SAS (ST: SAS ) stock slumped 8.9% after the Swedish government said it will not inject new capital into the loss-making airline and does not aim to be a long-term shareholder in the company.

Oil prices edged higher Tuesday, continuing the positive run as traders looked for increased demand from China, the world’s largest importer of crude, as the country relaxed two months of tough COVID-19 restrictions, easing travel restrictions around its capital Beijing and its commercial hub Shanghai.

Investors now await U.S. crude supply data from the American Petroleum Institute , due later in the day, with inventories expected to fall as the U.S. driving season kicks into top gear.

By 4 AM ET, U.S. crude futures traded 0.7% higher at $119.34 a barrel, while the Brent contract rose 0.7% to $120.30.

Additionally, gold futures rose 0.1% to $1,845.95/oz, while EUR/USD traded 0.1% lower at 1.0688.

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