European Stock Futures Weaken; Inflation Worries Grow

  • Stock Market News
European Stock Futures Weaken; Inflation Worries Grow
Credit: © Reuters.

By Peter Nurse - European stock markets are expected to open lower Thursday, following on from a sharp selloff on Wall Street with investors unnerved by fears over widespread inflation and a potential global economic slowdown.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.9% lower, CAC 40 futures in France dropped 0.8%, and the FTSE 100 futures contract in the U.K. fell 0.7%.

European equities are set to take their lead from a dramatic selloff on Wall Street overnight, with the blue-chip Dow Jones Industrial Average dropping over 1,100 points, or 3.6%, its biggest one-day loss since 2020.

This followed a number of major U.S. retailers posting disappointing quarterly earnings, warning of rising cost pressures, confirming investors’ worst fears over rising inflation.

Federal Reserve Chairman Jerome Powell warned earlier this week that the U.S. economy could be hurt by attempts to reduce inflation, but the central bank will "keep pushing" to tighten monetary policy until it is clear that inflation is declining.

This brings the minutes from the latest European Central Bank meeting, due for release later in the session, firmly into focus, with investors looking for clues for a potential timetable for monetary policy tightening.

Dutch central banker Klaas Knot, on Tuesday, raised the possibility of a 50 basis points hike in July, the first time that any ECB policymaker has mentioned that, and Bank of Finland Governor Olli Rehn said on Wednesday that the ECB should get its key rate above zero “relatively quickly.”

In the corporate sector, Assicurazioni Generali (BIT: GASI ) posted a 9.3% drop in first quarter net profit year-on-year, a smaller than expected fall after recording impairments on its Russian investments of 136 million euros ($143 million).

Earnings from the likes of Swiss bank Julius Baer (SIX: BAER ) and budget airline easyJet (LON: EZJ ) will also be studied Thursday.

Oil prices traded higher Thursday, bouncing from the previous session’s losses after U.S. crude inventories fell last week and on lingering worries over the tight global supply.

Data from the Energy Information Administration , released late Wednesday, showed U.S. crude oil inventories fell 3.4 million barrels for the week ended May 18, an unexpected drawdown, suggesting substantial demand.

Oil prices have generally been rising as Russian supply is squeezed by bans from several countries in the wake of the invasion of Ukraine.

The European Union has also proposed a phased total ban on Russian oil imports in six months' time, although these measures have yet to be adopted amid opposition from some eastern countries, including Hungary.

By 2:05 AM ET, U.S. crude futures traded 0.4% higher at $107.50 a barrel, while the Brent contract rose 0.8% to $109.94. Both contracts fell around 2.5% on Wednesday.

Additionally, gold futures fell 0.2% to $1,811.65/oz, while EUR/USD traded 0.2% higher at 1.0486.

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