European Stock Futures Drop; Macron’s Victory Offers Minor Respite
2022.04.25 09:32
By Peter Nurse
Investing.com – European stock markets are expected to open lower Monday as investors fret about the prospect of slowing global growth and sharp monetary policy tightening, with Emmanuel Macron winning a second term as French president offering minor relief.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 1.9% lower, CAC 40 futures in France dropped 0.9%, and the FTSE 100 futures contract in the U.K. fell 1.1%.
Macron was projected to have won the French presidential election late Sunday, comfortably beating the challenge of far-right rival Marine Le Pen. This will provide markets with a degree of stability in the Eurozone’s second-largest economy as well as reassurance about France’s commitment to an integrated Europe.
That said, this result was largely expected, and investors remain concerned whether the global economy can withstand the increasingly hawkish pivot from a number of key central banks, in particular, the Federal Reserve, the slowdown of Chinese growth due to COVID lockdowns as well as the impact of the ongoing Russia-Ukraine war.
Fed Chair Jerome Powell said last week a half-point interest rate increase “will be on the table” when the central bank meets in early May, suggesting a more hawkish path than projected at the central bank’s March meeting.
The ECB is also sending stronger tightening signals, with Vice President Luis de Guindos acknowledging last week the possibility of a rate increase in July, potentially the bank’s first in 12 years.
Also weighing on sentiment are concerns about the outlook for growth in China, the world’s second largest economy, as it battles its most significant outbreak of COVID-19 since the original flare-up.
Shanghai, China’s financial hub, reported almost 20,000 new cases on Sunday, suggesting the stringent containment measures in place for several weeks are only having a limited impact. Additionally, dozens of infections were found in Beijing, the nation’s capital, over the weekend.
Meanwhile, the war in Ukraine enters its third month, adding to the general state of uncertainty, particularly in Europe. U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin are due for talks on Kyiv Monday.
In corporate news, Swiss drugmaker Roche (SIX:RO) recorded a better-than-expected 10% rise in first quarter sales and confirmed its 2022 outlook, helped by strong demand for rapid COVID-19 antigen tests.
On the flip side, Dutch health technology company Philips (AS:PHG) said first quarter core profit dropped about a third from a year earlier, hit in part by a recall of a large number of its ventilators.
The main economic release in Europe on Monday will be the Ifo’s latest business climate survey from Germany, which is expected to show a small deterioration in sentiment.
Oil prices slumped to near two-week lows Monday on increased concerns that the spreading COVID outbreak in China, the world’s largest importer of crude, will stunt demand.
By 2:05 AM ET, U.S. crude futures traded 3.4% lower at $98.64 a barrel, while the Brent contract fell 3.3% to $102.60. Both benchmarks dropped around 5% last week, and have now fallen to levels last seen on April 12.
Additionally, gold futures fell 0.9% to $1,916.05/oz, while EUR/USD traded 0.3% lower at 1.0761.
