European Stock Futures Lower as U.S. Inflation Fears Weigh

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By Peter Nurse – European stock markets are seen opening lower Wednesday, as a jump in U.S. raised concerns the Federal Reserve could tighten its ultra-easy monetary policies sooner than previously expected.

At 2:05 AM ET (0605 GMT), the contract in Germany traded 0.2% lower, in France dropped 0.3% and the contract in the U.K. fell 0.1%.

European markets have received a weak handover from Asia, and also Wall Street, after data released Tuesday showed the U.S. jumped 0.9% in June, climbing 5.4% on the year, the biggest jump in U.S. inflation in 13 years.

“Yet another blowout inflation reading makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely ‘transitory’,” said analysts at ING, in a note. “The case for a 2022 rate hike is strong.”

With this in mind, investors will carefully study comments from Fed Chairman in his two-day semi-annual testimony to Congress, starting later Wednesday, for any sign that the latest numbers have changed his thinking.  

Back in Europe, the also surprised to the upside, with prices climbing 0.5% in June, a gain of 2.5% on the year. The release of Eurozone figures for May is due later in the session.

The second-quarter earnings season continues in the U.S. Wednesday following the strong numbers by the likes of Goldman Sachs (NYSE:) and JPMorgan (NYSE:) on Tuesday. More banks are due to report, with Bank of America (NYSE:), Citigroup (NYSE:) and Wells Fargo (NYSE:) all due to update before the market opens. 

Elsewhere, oil prices edged lower Wednesday after China’s crude imports fell 3% in the first half of the year, raising concerns about slowing demand at the world’s top importer.

That said, the market remains at elevated levels after closing at the highest level since October 2018 as a further drop in stocks indicated demand in the world’s largest consumer is still strong.

The reported that crude inventories slid by more than 4 million barrels last week, which would be an eighth straight weekly draw, the longest run of declines since January 2018, if confirmed by later on Wednesday. 

At 2 AM ET, U.S. crude futures traded 0.3% lower at $75.05 a barrel, after climbing 1.6% Tuesday, while the contract fell 0.2% to $76.36, after gaining 1.8% in the previous session.

Additionally, rose 0.2% to $1,814.20/oz, while traded 0.1% higher at 1.1790.

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