European Stock Futures Lower; Growth and Tightening Concerns Weigh

  • Stock Market News
European Stock Futures Lower; Growth and Tightening Concerns Weigh

By Peter Nurse - European stock markets are expected to open lower Friday, with investors fretting about the likelihood of slowing economic growth on the back of aggressive monetary policy tightening as well as the impact of the war in Ukraine.

At 2:15 AM ET (0615 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 1.9%, and the FTSE 100 futures contract in the U.K. fell 1.2%.

Comments from Jerome Powell late Thursday have weighed on global equity markets, as the U.S. Federal Reserve Chairman said a half-point interest rate increase will be "on the table" when the central bank meets in May, given the inflationary outlook, adding it would be appropriate to "be moving a little more quickly."

The main indices on Wall Street, all closed more than 1% lower, with the tech-heavy Nasdaq Composite leading the way, dropping more than 2%, and Asian markets have followed suit, with the Nikkei index in Japan down more than 1.5%.

Earlier Thursday, European Central Bank Vice President Luis de Guindos acknowledged the possibility of a rate increase in July, potentially the bank’s first in 12 years. This represented a significant shift after President Christine Lagarde played down the outlook for tightening policy at her press conference last week.

Additionally, the war in Ukraine continues to weigh on the outlook for global growth, with the International Monetary Fund cutting its global growth forecast by nearly a full percentage point earlier this week.

The World Bank estimated that the physical damage to Ukraine's buildings and infrastructure from Russia's invasion has reached roughly $60 billion to-date, while Ukraine’s prime minister, Denys Shmyhal, put the total cost of rebuilding the country at $600 billion.

U.K. retail sales dropped a substantial 1.4% on the month in March, data showed Friday, with the annual figure growing just 0.9%, a sharp slowdown from the previous month’s 7.2% growth.

In corporate news, Renault (EPA: RENA ) is likely to be in the spotlight Friday, as the French auto giant, the Western carmaker most exposed to the Russian market, posted a 2.7% drop in first quarter revenues compared with a year earlier, weighed by the conflict in Ukraine and problems with semiconductor supplies.

SAP (ETR: SAPG ) reported first quarter revenue growth of 11%, with the German business software group boosted by its cloud business, while French-Italian eyewear group EssilorLuxottica (EPA: ESLX ) also reported a sharp rise in first quarter revenues.

Oil prices weakened Friday, on course for weekly losses of around 4%, weighed by prospects of interest rate hikes and slowing global growth, while China, the world’s largest crude importer, continued to struggle with a COVID-19 outbreak.

By 2:15 AM ET, U.S. crude futures traded 1.3% lower at $102.31 a barrel, while the Brent contract fell 1.4% to $106.78. 

Additionally, gold futures rose 0.5% to $1,957.50/oz, while EUR/USD traded 0.1% higher at 1.0847.

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