European markets head for lower open as investors gauge economic outlook

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Holly Ellyatt

European markets are heading for a lower open on Monday as investors continue to assess inflationary pressures and the possible trajectory of central bank interest rates.

European markets closed higher on Friday last week as investors continued to assess the trajectory of monetary policy after some tough statements from U.S. Federal Reserve officials.

Global markets have taken some heart from lower-than-expected consumer and wholesale inflation prints recently, prompting bets that the U.S. central bank would have to slow its aggressive interest rate hikes.

However, St. Louis Fed President James Bullard said last Thursday that “the policy rate is not yet in a zone that may be considered sufficiently restrictive” and suggested that the terminal federal funds rate could reach the 5% to 7% range, higher than the market is currently pricing.

Overnight, shares in the Asia-Pacific mostly fell on Monday amid growing Covid concerns in China as its central bank kept the benchmark lending rates, or loan prime rates, on hold.

Meanwhile, S&P 500 futures fell slightly Sunday evening ahead of another batch of retail earnings to kick off a shortened week in the U.S. ahead of the Thanksgiving holiday.

Oil prices drop as China faces Covid concerns, Goldman Sachs cuts forecast

Oil prices fell by nearly a dollar as Covid concerns in China rose with the nation seeing the first virus-related deaths recorded since May this year.

Brent crude futures shed less than a dollar, or 0.9%, to stand at $86.83 per barrel and U.S. West Texas Intermediate futures dropped 1.09% to $79.21 per barrel.

Goldman Sachs cut its forecast for Brent oil by $10 to $100 per barrel for the fourth quarter of 2022, citing dented China demand with rising Covid concerns and insufficient details from the latest Group of 7 nations’ price cap on Russian oil.

“We believe the market has a right to be anxious about forward fundamentals,” economists led by Jeffrey Currie said in the note, adding the potential of further lockdowns in China is equivalent to the latest production cut by OPEC+.

— Lee Ying Shan

CNBC Pro: Strategist says Chinese tech stocks, like Alibaba, are ‘deeply undervalued’

This year’s 30% decline in the value of Chinese Big Tech stocks, such as Alibaba, has made them “incredibly cheap,” according to investment bank China Renaissance.

Its head of equities, Andrew Maynard, not only believes that the stock market appears to have bottomed, but also that investors may miss out on a rally if they remain underweight on China.

“Without a shadow of a doubt, being underweight China is going to cost you going forward,” Maynard said.

— Ganesh Rao

Markets are watching for more clues on Fed hikes and the economy in the week ahead

Investors may be a bit more cautious in the week ahead, with stocks seeking direction in quiet trading and the bond market’s warnings about recession getting louder.

The Thanksgiving holiday on Thursday should mean markets will likely be quiet Wednesday and Friday. Traders will be monitoring reports on Black Friday holiday shopping for feedback on the consumer.

“It’s really a week where data dependence is the key phrase,” said Julian Emanuel, senior managing director at Evercore ISI. “The bias [for stocks] is higher unless data continues to deteriorate and the Fed stays on its hawkish slant… which has clearly been reinforced in the last 48 hours.”

— Patti Domm, Tanaya Macheel

CNBC Pro: Morgan Stanley’s Mike Wilson predicts the S&P 500′s bottom, calls it a ‘terrific buying opportunity’

Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson says we’re in the “final stages” of the bear market, but the situation will remain challenging for a while longer.

He predicts when — and at what level — the S&P 500 will hit a “new low.”

— Weizhen Tan

European markets: Here are the opening calls

European markets are set to open lower on Monday as investors continue to monitor the uncertain economic outlook.

The U.K.’s FTSE index is expected to open 15 points lower at 7,386, Germany’s DAX down 54 points at 14,378, France’s CAC down 17 points at 6,629 and Italy’s FTSE MIB down 54 points at 24,445, according to data from IG.

There are no major earnings Monday. Data releases include German producer prices for October.

— Holly Ellyatt

Source : CNBC

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