European Stock Futures Show Little Movement; German Industrial Production Sees Modest Improvement
European stock futures are expected to open with minimal changes today as investors grapple with deteriorating economic conditions leading up to crucial central bank meetings next week. The DAX futures contract in Germany saw a marginal 0.1% increase at 02:00 ET (06:00 GMT), while CAC 40 futures in France rose by the same percentage. Conversely, the FTSE 100 futures contract in the U.K. experienced a slight 0.1% decline.
Anticipated gains in European stock markets may be constrained due to the release of disappointing trade figures from China, a key trading partner for Europe’s major corporations and the largest economy in Asia. China’s trade balance for May dwindled to a surplus of $65.8 billion, marking its lowest level since April 2022, when the COVID-19 pandemic caused substantial market closures worldwide. This decline primarily stemmed from a more significant-than-expected 7.5% drop in exports compared to the same period the previous year, with imports also declining by 4.5%.
The slump in exports serves as an indication of decelerating economic growth in Europe and the United States, which are China’s primary markets for domestically produced goods. Meanwhile, German industrial production experienced a modest upturn in April, with a 0.3% month-on-month increase. This improvement followed a revised 2.1% contraction in the previous month, as Europe’s largest economy strives to recover from its winter recession.
In light of the upcoming policy-setting meeting of the European Central Bank (ECB), investors will be closely observing several speeches by ECB officials today to gain further insight. The prevailing consensus is that the eurozone’s central bank will continue its cycle of raising interest rates, bolstered by President Christine Lagarde’s remark that it is premature to suggest a peak in core inflation despite signs of moderation.
The recent 25-basis-point interest rate hike by Australia’s central bank on Tuesday has sparked speculation that the Bank of Canada might follow suit later today, generating significant market interest.
Concerns regarding a slowdown in China’s post-COVID economic recovery have prompted a retreat in oil prices. The weak trade data from China has undermined expectations that the world’s largest importer of crude oil would drive demand to record levels this year. While industry data released on Tuesday indicated a larger-than-expected reduction in U.S. crude inventories, an unexpected surge in gasoline stocks dampened sentiment during the peak of the U.S. driving season.
As of 02:00 ET, U.S. crude futures were down by 0.7% at $71.26 per barrel, and the Brent contract also experienced a 0.7% drop, settling at $75.79. These benchmarks have effectively erased all the gains observed earlier this week following Saudi Arabia’s surprise announcement of additional supply cuts, considering its influential role as the de facto leader of the OPEC cartel.
Furthermore, gold futures saw a marginal 0.1% decrease, reaching $1,979.35 per ounce. Simultaneously, the EUR/USD currency pair exhibited a 0.1% decline, trading at 1.0686.
