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European stock futures lower; sentiment weakens ahead of Powell speech

Published 10/01/2023, 08:22
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By Peter Nurse

Investing.com - European stock markets are expected to open lower Tuesday, after hawkish comments from Fed officials hit risk sentiment ahead of a widely-anticipated speech by Federal Reserve Chair Jerome Powell.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.7% lower, CAC 40 futures in France dropped 0.6%, while the FTSE 100 futures contract in the U.K. fell 0.5%.

European stocks closed higher on Monday, trading near eight-month highs, on growing hopes that the Eurozone will only suffer a shallow recession in the new year, overturning earlier fears of a severe slowdown.

However, sentiment has shifted overnight after two Fed officials, Raphael Bostic and Mary Daly, said the U.S. central bank would likely hike (interest) rates to above 5% and hold them there for some time as it attempts to control inflation still at elevated levels.

Aggressive monetary tightening by the Fed has prompted fears of a recession in the U.S., likely weighing heavily on the global market given the importance of the largest economy in the world.

This brings a speech by Fed boss Powell later in the session firmly into focus, as investors look for more clarity on the pace of future rate hikes.

Back in Europe, U.K. retail sales rose 6.5% last month compared with a year earlier, according to data from the British Retail Consortium and KPMG, released earlier Tuesday.

“The numbers for sales growth in December look healthy,” said Paul Martin, U.K. head of retail at KPMG. “This is largely due to goods costing more and masks the fact that the volume of goods that people are buying is significantly down on this time last year.”

Other data due for release Tuesday include French and Spanish industrial production numbers for November, as well Spanish consumer confidence.

In corporate news, Airbus (EPA:AIR) is likely to be in the spotlight Tuesday with the aircraft manufacturer expected to announce its annual commercial aircraft orders and deliveries.

Oil prices fell Tuesday, handing back some of the previous session’s gains on fears that further interest rate hikes in the U.S., the largest consumer of crude in the world, would curb demand.

Industry group American Petroleum Institute is scheduled to release its weekly data on U.S. crude inventories later in the session, while the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is also due to release its short-term energy outlook.

By 02:00 ET, U.S. crude futures traded 0.3% lower at $74.38 a barrel, while the Brent contract fell 0.4% to $79.33.

Both benchmarks climbed 1% on Monday, after China, the world's biggest oil importer and second-largest consumer, opened its borders over the weekend for the first time in three years.

Additionally, gold futures fell 0.1% to $1,876.85/oz, while EUR/USD edged higher to 1.0730.

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