European Stock Futures Edge Lower; U.S. Inflation Weighs on Sentiment

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are expected to open marginally lower Thursday, continuing the previous session’s losses as investors digest the latest hotter-than-expected U.S. inflation report.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.4% and the FTSE 100 futures contract in the U.K. fell 0.3%.

The main European indices closed lower Wednesday after consumer inflation in the U.S. leaped to a new four-decade high of 9.1% in June, exceeding analysts' forecasts for a rise of 8.8% and piling further pressure on the Federal Reserve to increase interest rates once more.

The U.S. central bank raised its benchmark interest rates by 75 basis points in June, its biggest rate hike since 1994, and this reading could prompt the Fed to hike by a similar hefty amount later this month, even if this runs the risk of pushing the U.S. economy, the main global growth driver, into recession.

Additionally, this presents a dilemma for the European Central Bank as the euro falls close to parity against the dollar in the face of tightening U.S. monetary policy. The weak currency runs the risk of pushing up already record high inflation, or the ECB could respond with its own version of rapid interest rate hikes increasing the pressure on an economy already hit hard by high energy costs.

The European Commission is set to announce new economic forecasts later in the session, but is set to dramatically cut its GDP forecast for 2022 and 2023, according to a draft of the projections seen by Bloomberg, on the back of the war in Ukraine, surging prices and the danger of winter energy shortages.

In corporate news, Norwegian oil services firm Aker Solutions (OL:AKSOA) raised its 2022 revenue outlook as it sees increased activity from oil and gas companies, while Finnish elevator maker Kone (HE:KNEBV) lowered its sales and profit outlook for this year due to among other things weak second-quarter sales in China.

Numbers are also expected from the likes of Swedish telecommunications giant Ericsson (BS:ERICAs), Nordic bank SEB (ST:SEBa) and credit reporting company Experian (OTC:EXPGF), but most focus will be on the banking sector with quarterly earnings from major U.S. banks JPMorgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS) due later in the session.

 Oil prices edged lower Thursday, with the red-hot inflation numbers and U.S. government data showing the largest weekly fuel stockpiles build since January weighing.

Wednesday’s U.S. crude supply data from the U.S. Energy Information Administration showed a build of 3.254 million barrels for the week ended July 8, bolstered by another big release from strategic reserves.

Oil prices have tumbled in the past two weeks on recession concerns, falling through $100 a barrel on Tuesday for the first time since April.

By 2 AM ET, U.S. crude futures traded 0.2% lower at $96.13 a barrel, while the Brent contract fell 0.1% to $99.51. 

Additionally, gold futures fell 0.6% to $1,725.15/oz, while EUR/USD traded 0.4% lower at 1.0019.