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European Stock Futures Mixed; U.K. Set to Deliver "Mini Budget"

Published 23/09/2022, 07:18
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By Peter Nurse

Investing.com - European stock markets are expected to open in a mixed fashion Friday, as investors digest a series of interest rate hikes ahead of a fiscal update by the new U.K. administration.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.3% lower, CAC 40 futures in France dropped 0.3%, while the FTSE 100 futures contract in the U.K. rose 0.2%.

European equities are heading for deep weekly losses as rising interest rates across the globe threaten to sharply curtail economic growth, weighing on risk appetite.

The Federal Reserve led the way by hiking by 75 basis points and signaling a more aggressive stance towards combating inflation. This was followed in Europe by rate increases from the Bank of England, the Swiss National Bank and the Norges Bank in Norway.

The European Central Bank had also tightened by an unprecedented 75 basis points last week.

The macroeconomic outlook in Europe is bleak, HSBC warned Friday, in a note, as supply disruptions and the impact of Russia’s war in Ukraine on energy and food prices continue to stifle growth, and force central banks to tighten monetary policy aggressively to rein in inflation.

“I would caution against buying Europe because of the cheaper valuations and interest rate movements,” an analyst at HSBC said.

That said, the U.K. market could outperform Friday with new finance minister Kwasi Kwarteng set to deliver his first fiscal update to parliament, a so-called "mini Budget". He is set to provide more details about his plans to support the country’s economy through what is likely to be a difficult winter.

Economic data due for release in Europe Friday includes Spanish GDP for the second quarter as well as September manufacturing and services PMI numbers for most of the continent.

In corporate news, Aveva (LON:AVV) is likely to be in the spotlight as the Financial Times reported that a major investor in the British information technology consulting company plans to reject Schneider Electric (EPA:SCHN)'s 9.5 billion pounds ($10.66 billion) takeover offer, which the French industrial group launched on Wednesday.

Oil prices fell Friday, on course for a fourth consecutive weekly decline after a series of interest-rate hikes around the world increased fears of a global economic slowdown, hitting the demand for energy.

The decision of Russia to escalate its invasion of Ukraine, mobilizing more troops to stem recent Ukrainian gains, helped stem losses, but both contracts are on course for weekly losses of around 2% in the wake of the monetary tightening, led by the Federal Reserve.

By 02:00 ET, U.S. crude futures traded 0.2% lower at $83.31 a barrel, while the Brent contract fell 0.3% to $90.22.

Additionally, gold futures fell 0.1% to $1,679.65/oz, while EUR/USD traded 0.1% lower at 0.9829.

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