European stocks may open on a sluggish note Wednesday despite gains in U.S. stock futures and fresh signs of economic recovery in China.
Investors continue to assess the outlook for inflation and interest rates in the face of continued geopolitical and macro-economic uncertainties.
Asian markets were mostly lower, though Chinese and Hong Kong stocks eked out modest gains after data showed China’s industrial profits rose at the fastest pace in at least more than a year in August.
Data showed that China’s industrial profits surged 17.2 percent from a year earlier in August, compared with a 6.7 percent decline in July and June’s fall of 8.3 percent.
Elsewhere, Australian consumer inflation accelerated in August, stirring debate around another RBA cash rate hike.
Closer home, consumer confidence data from Germany and France are due later in the session, headlining a light day for the European economic news.
Across the Atlantic, a report on durable goods orders may attract some attention ahead of the release of key GDP and inflation readings later in the week.
Investors are also concerned about the possibility of a partial U.S. government shutdown despite the Senate unveiling a short-term spending bill that would keep the government open through November 17.
The dollar steadied near 10-month highs while gold held near one-month lows on interest-rate fears.
Oil prices rose about 1 percent to extend overnight gains on expectations of tightening supply.
Overnight, U.S. stocks pulled back sharply to reach their lowest closing levels in over three months on uncertainty about the Fed’s rate path and worries over a possible government shutdown.
In economic releases, a measure of consumer confidence hit a four-month low in September and sales of newly built homes fell in August – raising fears that the world’s largest economy could be headed for a recession.
In an interview with the Times of India, JPMorgan CEO Jamie Dimon warned investors to prepare for a worst-case scenario where the Fed lifts rates to 7 percent alongside stagflation.
Minneapolis Federal Reserve President Neel Kashkari also wrote in an essay that there is a 40 percent chance the Federal Reserve will have to push rates “meaningfully higher” to combat stubborn services inflation.
The S&P 500 plummeted 1.5 percent to close below 4,300 for the first time since June 9, while the Dow gave up 1.1 percent and the tech-heavy Nasdaq Composite plunged 1.6 percent.
European stocks fell for the fourth straight session on Tuesday amid worries about China’s economic recovery and interest rates staying elevated for longer.
The pan European STOXX 600 dropped 0.6 percent. The German DAX lost 1 percent and France’s CAC 40 shed 0.7 percent while the U.K.’s FTSE 100 finished marginally higher.
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