European Stock Futures Weaken; ECB Tightening Fears Grow By Investing.com


© Reuters.

By Peter Nurse

Investing.com – European stock markets are expected to open lower Tuesday amid nervousness of potential monetary policy tightening to combat inflation, while the U.K. suffers political turmoil.

At 2 AM ET (0600 GMT), the contract in Germany traded 0.8% lower, in France dropped 0.6%, and the contract in the U.K. fell 0.4%.

European equities are expected to feel the repercussions of the hawkish move by Australia’s central bank earlier Tuesday, raising interest rates by the most in 22 years and signaling more tightening to come as it battles to restrain surging inflation.

The lifted its by 50 basis points to 0.85%, a more severe tightening than the 25 basis points many investors had expected, resulting in the , Australia’s main equity index, dropping 1.5%.

The meets on Thursday and had been widely expected to use this get-together to make clear that rate hikes will be coming in the third quarter.

However, concerns are growing that the policymakers could choose to signal a sharper tightening path than the plan outlined by ECB President Christine Lagarde a couple of weeks ago, especially after rose to a record 8.1% in May.

Lagarde suggested the central bank should start lifting its , currently standing at -0.5%, in July, reaching zero or “slightly above” by the end of September, before rising further “towards the neutral rate.”

The U.K. market will also be in focus Tuesday after Prime Minister survived a vote of no-confidence from his own lawmakers but now faces a tricky battle to win back the confidence of his party and country.

Johnson won the vote 211 to 148, a weaker showing than when the same lawmakers tried to oust his predecessor Theresa May, who won her vote but then resigned six months later.

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

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 2 AM ET, futures traded 0.4% higher at $118.92 a barrel, while the contract rose 0.3% to $119.86.

Additionally, rose 0.1% to $1,841.20/oz, while traded 0.2% lower at 1.0674.

Be the first to comment

Leave a Reply

Your email address will not be published.


*