European stock markets are likely to open down on Thursday. Another big increase in interest rates by the Federal Reserve and weak economic data from China have raised fears of a global recession before a meeting of the Bank of England.
At 3:00 p.m. ET (7:00 p.m. GMT), the DAX futures contract in Germany was down 0.7%, the CAC 40 futures contract in France was down 0.8%, and the FTSE 100 futures contract in the U.K. fell 0.6%.
As most people expected, the U.S. central bank raised interest rates by 75 basis points on Wednesday. However, the mood of the country took a hit when Chair Jerome Powell said it was “very premature” to think about stopping the cycle of rate hikes and that rates were likely to reach a higher peak than people had thought before.
This was disappointing for investors, who had hoped that the Fed’s head would signal a slower pace of rate hikes in the future, since there have been signs that growth in the world’s largest economy is slowing down.
China’s services activity fell again in October, adding to worries about a global slowdown. The Caixin services purchasing managers’ index fell to 48.4, the lowest level since May, from 49.3 in September. This was because COVID-19 containment measures hurt both businesses and consumers.
Every month, the 50-mark is the line between contraction and growth.
Now, attention will turn to the Bank of England on Thursday. The Bank of England is also expected to raise rates by 75 basis points to fight inflation that is in the double digits. This would be the biggest increase since 1989, and the base rate would go up to 3%, which is the highest level since 2008.
The BOE is also likely to raise its predictions for CPI and cut its predictions for GDP. The BOE has already predicted that the U.K. economy will soon go into a long-lasting slump.
On Thursday, the Eurozone unemployment rate for September and the U.K. inflation rate will be released. October activity data for services.
In the corporate sector, BNP Paribas (EPA:BNPP), the largest bank in the euro zone, had a net profit in the third quarter that was higher than expected. This was due to strong trading revenues.
As it reported its quarterly financial results, Zalando (ETR:ZALG), which is Europe’s largest online clothing store, said it expects its full-year sales and operating profit to be at the lower end of its target range.
Oil prices went down on Thursday, coming down from a three-week high. This happened after weak economic data from China showed that the world’s largest crude importer might be slowing its demand growth.
The stronger dollar after the Fed raised interest rates and said there would be more to come also hurts the crude market. This is because it makes the commodity more expensive for foreign buyers.
By 3:00 p.m. ET, U.S. crude futures were down 0.8% to $89.28 per barrel, and the Brent contract was down 0.6% to $95.55 per barrel.
Both contracts went up on Wednesday, reaching their highest levels since October 10. This was because official data showed that U.S. inventories fell by 3.115 million barrels during the week ending October 28. This was more than what was expected.
Also, gold futures dropped 0.8% to $1,636.75/oz, and EUR/USD fell 0.1% to 0.9809.
