European Stock Futures Lower; U.K. CPI, Powell Testimony in Focus By

© Reuters.

By Peter Nurse 

- European stock markets are expected to open lower Wednesday, handing back some of the week’s early gains amid persistent concerns about inflation and the monetary policy tightening to combat it.

At 02:05 a.m. ET (0605 GMT), the DAX futures contract in Germany traded 1.6% lower, CAC 40 futures in France dropped 1.6% and the FTSE 100 futures contract in the U.K. fell 1.1%.

The main European indices posted minor gains on Tuesday, adding to Monday’s improvement in the wake of last week’s hefty losses as a number of global central banks tightened monetary policies to tame red hot inflation.

However, global sentiment has turned negative, with markets in Asia largely lower and U.S. futures in the red as investors warily await the start of U.S. Federal Reserve chair Jerome Powell’s two-day testimony to Congress later Wednesday.

Investors will be looking for further clues about whether another 75 basis point rate hike is on the cards at the Fed's July meeting, amid uncertainty whether aggressive monetary tightening to combat the raised levels of inflation will force the U.S. economy, the world’s main growth driver, into recession.

Back in Europe, the U.K. inflation rate for May rose 9.1% on the year, maintaining an elevated level while acting as another gauge of price rises in Europe.

Additionally, there are a couple of European Central Bank policy-makers scheduled to speak later in the session, and investors will be hanging on every word after ECB President Christine Lagarde restated on Monday the central bank’s intention to raise interest rates in July and September.

Oil prices slumped Wednesday as traders fretted about an economic slowdown in the U.S., the largest consumer of crude in the world, ahead of the appearance of Fed Chair Jerome Powell before Congress later Wednesday.

Also weighing on the market is a push by the Biden administration to bring down soaring fuel costs, an issue that is rapidly becoming a political problem ahead of the midterm elections. 

President Joe Biden is expected on Wednesday to call for temporarily suspending the 18.4-cents a gallon federal tax on gasoline, Reuters reported, while seven major oil companies are set to meet with the president on Thursday.

Weekly U.S. petroleum inventory data from the American Petroleum Institute for the week ending June 17 are due later Wednesday, a day later than usual after Monday’s U.S. holiday.

By 02:00 a.m. ET, U.S. crude futures traded 3.8% lower at $105.41 a barrel, while the Brent contract fell 3.5% to $110.69. 

Additionally, gold futures fell 0.7% to $1,826.30/oz, while EUR/USD traded 0.3% lower at 1.0490.

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