European stock futures mixed; recession fears breed nervousness

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By Peter Nurse 

AiVIF.com - European stock markets are expected to trade mixed Thursday, with investors fretting about the state of the global economy ahead of next week’s crucial central bank meetings.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.1% higher, CAC 40 futures in France climbed 0.1%, while the FTSE 100 futures contract in the U.K. fell 0.1%.

European investors are likely to retain a state of nervousness as the week nears the end, having been rattled by downbeat comments from top executives at a number of senior banks, predicting that tightening monetary conditions will likely result in a global recession in 2023.

Next week sees policy-setting meetings by the U.S. Federal Reserve and the European Central Bank, and these two senior central banks are both expected to lift interest rates once more to tackle inflation still at elevated levels.

The Fed is widely expected to issue a 50 basis point interest rate hike next week, and while that would be a smaller increase than recent rate hikes, investors are increasingly concerned that this just means a longer rate-hike cycle.

The ECB is also likely to hike by 50 basis points, but there exists a hawkish group within the central bank that wants a third successive increase of 75 basis points, even after Eurozone inflation fell for the first time in 18 months.

“It was a pleasant number last month, but I’m afraid it would be too soon to celebrate an inflation peak,” European Central Bank Governing Council member Peter Kazimir said Wednesday. “It wouldn’t be right to slow down the monetary tightening because of a single better inflation number. I still see many reasons to continue in the set pace of policy tightening.”

There has been some good news this week, with authorities in China relaxing a range of COVID restrictions, a decision which could boost the second largest economy in the world, and a major export market for European companies. 

There is little on the European economic calendar Thursday, but appearances by assorted central bankers, including ECB president Christine Lagarde, will be studied carefully. 

Crude oil prices rose Thursday, rebounding after falling to their lowest levels this year, although gains are tentative as concerns of a global economic slowdown grow.

The market received a boost from data released Wednesday showing U.S. inventories shrank more than expected last week, while China's loosening of more of its COVID mobility restrictions also helped sentiment.

However, worries about demand growth, particularly from the U.S. market, the largest consumer in the world, remain the dominant influence on the crude market.

By 02:00 ET, U.S. crude futures traded 1.6% higher at $73.19 a barrel, while the Brent contract rose 1.4% to $78.28. 

Brent settled on Wednesday below the year's previous closing low touched on the first day of 2022, while the U.S. contract dropped to a fresh yearly low.

Additionally, gold futures edged higher to $1,798.30/oz, while EUR/USD traded 0.1% higher at 1.0514.