European equity futures mixed; cautious start to the new week


By Peter Nurse – European stock markets are expected to trade mixed at the open on Monday, starting the new week on a cautious note amid doubts over the region’s economic recovery.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded down 0.2%, the FTSE 100 futures contract in the UK fell 0.2%, while the CAC 40 term in France rose by 0.4%.

Major European indices followed their US peers up sharply last week, with the benchmark S&P 500 posting its biggest weekly gain in nearly five months, after Consumer prices in the United States rose less than expected in October, raising hopes that Federal Reserve slow down its aggressive monetary tightening campaign.

However, Fed Governor Christopher Waller tried to dampen that optimism on Sunday, saying markets shouldn’t get carried away by a single “data point.”

The Fed’s addition may consider slowing the pace of rate hikes at its next meeting, but that shouldn’t be seen as a “softening” of its battle against inflation.

Back in Europe, the European Central Bank still has some way to go before catching up with the magnitude of Fed tightening, while inflation in the region continues to climb.

The United States could simply avoid falling into recession next year, thanks to a resilient labor market, Morgan Stanley analysts said, in a note, but Britain and the economies are unlikely of the euro zone are just as lucky.

“Risks are on the downside,” the bank said, forecasting the global economy to grow 2.2% next year, lower than the International Monetary Fund’s latest growth estimate of 2.7%.

Data due later Monday is expected to show Euro area industrial production up just 0.3% from September, significantly slower growth than the 1.5% increase seen the previous month.

Attention will also be on the UK government’s new budget plan on Thursday, particularly after the car crash that made up September’s mini budget. British Chancellor Jeremy Hunt has indicated that around £60 billion (£1=$1.1837) in tax increases and spending cuts are filling a gaping hole in public finances.

When it comes to the corporate sector, there are few big business profits to digest, but Rheinmetall Inc (ETR:RHMG) will be in the spotlight after the German military equipment maker agreed to acquire the manufacturer ammunition company Expal Systems for 1.2 billion euros.

Oil prices fell slightly on Monday, returning some of the recent gains as the US dollar strengthened, making the commodity more expensive for overseas buyers.

Crude prices had rebounded strongly on Friday, posting gains of around 3%, after Chinese health authorities reduced the quarantine period for inbound travelers, raising hopes for a more substantial easing of the country’s zero-COVID policy.

However, the number of reported cases in China increased over the weekend, making it difficult for the country’s government to adjust its strict policy as winter approaches.

As of 2 a.m. ET, U.S. crude futures were trading down 0.4% at $88.61 a barrel, while the Brent contract was down 0.3% at $95.66.

Additionally, gold futures fell 0.2% to $1,765.65 an ounce, while EUR/USD traded down 0.3% to 1.0325.

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