European Stock Futures Edge Higher; ECB Meeting Looms Large

By Peter Nurse

Investing.com - European stock markets are expected to open higher Thursday, boosted by the positive close on Wall Street lifting global sentiment, but gains are likely to be tentative ahead of the latest European Central Bank policy-setting meeting.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.5% higher, CAC 40 futures in France climbed 0.3%, and the FTSE 100 futures contract in the U.K. rose 0.2%.

The European Central Bank will be the market’s main focus Thursday, with the central bank widely expected to raise interest rates once more in an attempt to combat inflation rapidly approaching double figures.

Although a hike of 50 basis points is the most likely move, matching July’s increase, with inflation at record levels and the cut in Russian gas supply pushing energy prices even higher, the case is strong for the ECB to be even more aggressive and deliver its biggest ever rate hike of 75 basis points.

That said, the central bank faces a balancing act, with economic activity in the Eurozone already slowing significantly due to the ongoing energy crisis, pointing to a recession later in the year.

European stock markets are set to receive a positive handover from Wall Street Thursday, as the blue-chip Dow Jones Industrial Average closed Wednesday’s session over 400 points, or 1.4% higher, snapping seven sessions of consecutive declines.

Fed Chair Jerome Powell is scheduled to take part in a panel discussion at the Cato Institute's virtual meeting later Thursday, and investors will be looking for clues about the central bank's thinking ahead of its next policy-setting meeting later this month.

In corporate news, Melrose Industries (LON:MRON) will be in the spotlight after the Financial Times reported the jet and auto parts supplier plans to spin off its GKN automotive unit as a new UK-listed company, breaking up one of Britain's oldest engineering businesses.

Oil prices rose Thursday, helped by a forecast of slightly higher demand and tighter supply going into 2023 by the U.S. Energy Information Agency, although concerns over weakening global growth limited the gains.

The EIA said in its monthly Short-Term Energy Outlook report that it expects global crude demand to increase in the fourth quarter of 2022 and the first quarter of 2023, while also forecasting lower U.S. oil production this year.

This positive report was partly negated by data from the American Institute of Petroleum showing that U.S. crude stockpiles unexpectedly rose last week, raising concerns over slowing global oil demand. Official inventory data is due later in the session, a day later than usual due to Monday's Labor Day holiday.

By 02:00 ET, U.S. crude futures traded 0.9% higher at $82.66 a barrel, while the Brent contract rose 0.7% to $88.61. Both contracts fell to their lowest levels since January on Wednesday, after weak economic data from China raised concerns of a global economic slowdown.

Additionally, gold futures edged lower to $1,727.45/oz, while EUR/USD traded 0.1% higher at 1.0005.