European markets head for tepid open as investors monitor recession risks

Holly Ellyatt

European markets are heading for a slightly higher open on Tuesday after a negative start to the week following remarks from U.S. Federal Reserve Chair Jerome Powell last Friday.

At a top central bankers’ conference, Powell signaled higher interest rates would likely persist in a bid to tame soaring inflation.

In his much-anticipated annual policy speech at Jackson Hole, Wyoming, Powell said that the Fed will “use our tools forcefully” to control inflation, which is still running near its highest level in more than 40 years. He acknowledged that rising interest rates will cause “some pain” to households and businesses.

Powell’s comments were echoed by European Central Bank board member Isabel Schnabel over the weekend. Schnabel reaffirmed the view that central banks must act aggressively to tackle rising inflation, even if that means dragging their economies into a recession.

Shares in the Asia-Pacific also traded lower on Monday and were trading mixed overnight.

CNBC Pro: Strategist reveals why this FAANG stock is a safe bet heading into September

A “seasonally weak” period for equities is just around the corner, and that could mean more volatility for stock markets.

But King Lip, chief strategist at BakerAvenue Wealth Management, believes one FAANG stock could be a safe bet.

— Zavier Ong

The U.S. needs a ‘miracle’ if it is to avoid a recession: Stephen Roach

The U.S. will be going into a recession unless a “miracle” happens, said Stephen Roach, who was formerly chair of Morgan Stanley Asia.

“We’ll definitely have a recession as the lagged impacts of this major monetary tightening start to kick in,” he told CNBC’s “Fast Money” on Monday. “They haven’t kicked in at all right now.”

“The unemployment rate has got to go probably above 5%, hopefully not a whole lot higher than that. But it could go to 6%,” Roach added.

— Jihye Lee, Stephanie Landsman

CNBC Pro: Analyst names the stocks ‘at risk of going to $0’ and 3 top picks, giving one over 80% upside

Stocks burning through cash are about to get hit, says David Trainer, CEO of investment research firm New Constructs.

That’s because interest rates are going to get even higher, which means liquidity will start to dry up, he explained

He tells investors to avoid “zombie” stocks and identifies stronger bets.

— Weizhen Tan

European markets: Here are the opening calls

European stocks are expected to open cautiously higher on Wednesday with the U.K.’s FTSE index seen 18 points higher at 7,560, Germany’s DAX 33 points higher at 13,944, France’s CAC 40 up 18 points at 6,616 and Italy’s FTSE MIB up 42 points at 23,029, according to data from IG.

Data releases include preliminary euro zone unemployment data for the second quarter as well as second quarter gross domestic product. The latest U.K. inflation numbers for July will be released as well as preliminary second quarter Dutch GDP.

Earnings come from Uniper, Carlsberg, Persimmon, Balfour Beatty, BAT and National Grid.

Source : CNBC