December 11, 2023

European Stock Futures Mixed; U.K. Inflation Climbs Ahead of Fed Rate Decision

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mirrored-glass skyscraper showing Eurosymbol on the facade

European stock markets are expected to trade in a mixed fashion at the open Wednesday as investors digest U.K. inflation data and nervously await the latest Federal Reserve decision on interest rates. At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.2% higher, the FTSE 100 futures contract in the U.K. rose 0.1%, while CAC 40 futures in France dropped 0.2%. Sentiment has improved in equity markets across the globe, with U.S. Treasury Secretary Janet Yellen saying she was prepared to intervene to protect depositors in smaller banks helping to soothe nerves. This followed the rescue of troubled lender Credit Suisse (SIX:CSGN) by its Swiss rival UBS (SIX:UBSG), a deal that was brokered and supported by the Swiss government over the weekend. The focus now turns to a Federal Reserve interest rate decision later in the day, with the central bank policymakers having to strike a balance between fighting inflation and pacifying a banking crisis. Investors still widely expect the Fed to hike interest rates by 25 basis points, but there is a great deal of uncertainty over future monetary policy given inflation remains elevated but concerns over the stability of the banking system could limit the central bank’s hawkish stance.

Evidence of Continued inflationary Pressures Came From.

the latest U.K. figures, as consumer prices rose 1.1% on the month in February, up 10.4% on an annual basis. The Bank of England meets on Thursday and is also expected to lift interest rates once more by another 25 basis points to 4.25%, although Governor Andrew Bailey has signaled he may be prepared to pause rate increases. The European Central Bank increased its benchmark rates by 50 basis points last week, and Bundesbank President Joachim Nagel said more hikes were needed to combat inflation. “There’s still some way to go, but we are approaching restrictive territory,” said Nagel, in an interview in the Financial Times, published Wednesday. Oil prices fell Tuesday after industry data unexpectedly pointed to another week of rising U.S. inventories, a sign fuel demand may be weakening in the world’s largest consumer. Data from the American Petroleum Institute, released late Tuesday, showed U.S. crude stocks rose by about 3.3 million barrels last week, defying expectations for a drawdown of about 1.6 million barrels. Confirmation of a rise by the official inventory data, due from the U.S. Energy Information Administration later this session, would see inventories growing for 12 of the past 13 weeks. By 03:00 ET, U.S. crude futures traded 0.7% lower at $69.19 a barrel, while the Brent contract dropped 0.6% to $74.84.

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