European Stock Futures Lower; Fed Minutes Point to Aggressive Tightening

  • Stock Market News
European Stock Futures Lower; Fed Minutes Point to Aggressive Tightening
Credit: © Reuters.

By Peter Nurse - European stock markets are expected to open lower Thursday, continuing the sharp losses from the previous session with investors wary after U.S. Federal Reserve policymakers suggested the need for tighter monetary policy to combat inflation.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.4%, and the FTSE 100 futures contract in the U.K. fell 0.1%.

The Fed signaled in its minutes on Wednesday that it was prepared to act more quickly to tighten the reins on the economy to contain rampant inflation, including pare-down of its balance sheet of bonds more quickly than originally anticipated.

This news pressured the major averages on Wall Street, with the tech-heavy Nasdaq Composite the hardest hit, dropping 2.2% on Wednesday. The major European indices also suffered, with the DAX and the CAC 40 both closing around 2% lower.

Investors are concerned the likely meatier interest rate hikes down the line–with ”many" policymakers now prepared to lift interest rates in 50-basis-point increments at coming meetings–will severely cut growth in the world’s largest economy, and the major global driver. 

Earlier this week, Deutsche Bank became the first big bank on Wall Street to call for a U.S. recession, predicting a downturn by the summer of 2023. 

Investors are also continuing to keep an eye on developments surrounding the war in Ukraine, after the United States announced new measures on Wednesday to punish Moscow, including sanctions on President Vladimir Putin's two adult daughters and Russia's Sberbank, and a ban on Americans investing in Russia.

Ukraine President Volodymyr Zelensky called on the West to do more, in his daily video address early on Thursday, seeking sanctions that are economically destructive enough for Russia to end its war.

Looking at economic data, German industrial production rose 0.2% on the month in February, better than expected but still a hefty drop from the gain of 2.7% the previous month, ahead of the release of Eurozone retail sales data for February.

In corporate news, Credit Suisse (SIX: CSGN ) is likely to be in the spotlight after the Swiss banking giant published restated historical financial information, reflecting its new divisional reporting structure that was announced in November.

Oil prices rebounded Thursday after the previous session’s sharp losses on the news that a number of major consuming nations will release crude from emergency reserves to offset supply lost from Russia. 

International Energy Agency member countries announced Wednesday that they would release 60 million barrels of oil, adding to the 180-million-barrel release announced by the United States last week.

Adding to Wednesday’s woes, data from the Energy Information Administration showing U.S. crude oil inventories rose by over 2 million barrels last week, the first climb in three weeks, raising questions about energy demand in the world’s largest oil consuming country.

By 2 AM ET, U.S. crude futures traded 1.7% higher at $97.88 a barrel, while the Brent contract rose 1.9% to $103.03. Both benchmarks settled more than 5% lower on Wednesday, falling to a three-week low.

Additionally, gold futures fell 0.1% to $1,922.50/oz, while EUR/USD traded 0.2% higher at 1.0913.

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