European stock markets will open higher Tuesday. This is a recovery effort after a slow start, when investors worried about rising interest rates as well as a worsening economic outlook.
At 02:00 ET (06:00 GMT), DAX futures contracts in Germany traded 1% lower, CAC 40 futures rose 0.5% in France, and FTSE 100 futures increased 0.4% in the U.K.
European equity markets closed lower Monday, continuing September’s negative trend. Investors are concerned that aggressive monetary tightening will lead to a global recession.
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Stocks are opening higher for the fourth time in four sessions. However, any gains will be limited because any growth is unlikely to be found for much of the year.
Christine Lagarde, ECB president, stated Monday that the European Central Bank will likely raise interest rates more over its “next few meetings”. These hikes are intended to dampen demand.
Goldman Sachs has downgraded equity to underweight in its global allocation for the next three month, stating that rising real yields as well as the possibility of a recession indicate that the rout is still on.
Analysts at the influential U.S. bank for investment wrote in a note that current equity valuations might not reflect these risks fully and may have to fall further to reach market troughs.
Investors will be watching developments in Italy following Sunday’s victory of Giorgia Meloni’s right-wing coalition. The country’s first woman leader is facing a dimming economic outlook, rising bond yields and high levels of debt. There will also be an increase in energy prices following the Russian invasion of Ukraine.
The Bank of England will also be under scrutiny after the sharp selloff of the pound in the wake of Kwasi Kwarteng, the new U.K. finance Minister, announcing Britain’s largest package of tax cuts in 50-years. This is likely to be financed by higher borrowing.
Andrew Bailey, the BoE Governor, attempted to calm markets Monday by declaring that the bank would raise rates as needed at its next meeting. However, sterling’s rebound was limited with the next meet-up being over a month away.
Tuesday’s oil prices edged up, recovering from their lowest level since January. Markets considered the possibility of a reduction in supply, despite recessionary concerns, tighter monetary policy and a rallying dollar, which dimmed the outlook on demand.
Chevron and BP, major crude oil producers, announced that they had reduced production at certain offshore oil platforms in the Gulf of Mexico to prepare for Hurricane Ian.
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Ihsan Abdul Jabbar, the Iraqi Oil Minister, said that the Organization of the Petroleum Exporting Countries (OPEC+) was monitoring the oil price situation and could reduce output at the next week’s meeting.
U.S. crude futures were 1.2% higher at $77.65 per barrel by 02:00 ET. Brent contracts rose 1.2% to $83.88. Both contracts fell by around $2 per barrel Monday, in addition to Friday’s 5% slump.
Gold futures also rose 0.6% to $1642.30/oz, while EUR/USD traded 0.5% lower at 0.9650.
