European stock markets went up on Tuesday, making up for last week’s big drop, but there are still worries that aggressive rate hikes by central banks to fight inflation could cause a global recession.
By 3:50 a.m. ET (0750 GMT), the DAX in Germany was up 1.1%, the CAC 40 in France was up 1.4%, and the FTSE 100 in the UK was up 0.6%.
The good mood in Europe comes as markets around the world seem to be making a comeback after a rough week last week. This was caused by a number of central banks around the world tightening monetary policy to slow down red-hot inflation.
Last week, the U.S. Federal Reserve, the Swiss National Bank, and the Bank of England all raised interest rates. On Monday, Christine Lagarde, president of the European Central Bank, said that the central bank still plans to raise interest rates in July and September, even though bond markets in the Eurozone have been a bit unstable lately.
According to the Weil European Distress Index, corporate distress in Germany, the UK, France, Spain, and Italy has reached its highest level since August 2020. This is because of rising inflation and higher interest rates that were put in place to fight it.
Aside from that, investors will be keeping a close eye on the political situation in France after the weekend elections left the government in a stalemate.
President Emmanuel Macron is likely to invite all political parties that can form a group in the new parliament to talk about politics later on Tuesday. If talks fail, it could lead to a standstill in politics.
In business news, Ocado (LON:OCDO) stock fell 4.3% after the online grocery store said late Monday that it was selling discounted shares to raise 575 million pounds ($707 million).
Rolls-Royce (OTC:RYCEY) stock rose 1.2 percent after Sky News reported that the engine manufacturer will provide a 2,000 pound ($2,460) cash bonus to nearly three-quarters of its U.K. employees to help them deal with rising living costs.
Oil prices went up on Tuesday, making up for some of last week’s big drops. Traders focused again on the limited supply of crude oil and the possibility that the U.S. and China will need more of it soon.
By 3:50 AM ET, U.S. crude futures were up 1.7% to $109.84 per barrel, while the Brent contract was up 1% to $115.31 per barrel.
Both benchmarks fell for the first time since April last week. People were concerned that aggressive monetary tightening would cause a global recession and harm demand.
The WTI contract fell by more than 9% last week, and it didn’t trade on Monday because it was a U.S. holiday. On the other hand, Brent fell by more than 7%, and it only gained 0.9% in the session before.
Also, gold futures went down 0.2 percent to $1,837.55/oz, and the EUR/USD went up 0.5 percent to 1.0561.
