European Stock Futures Higher; Ukraine Offensive Helps Tone

By Peter Nurse 

Investing.com - European stock markets are expected to open with modest gains Monday, continuing the positive trend seen at the end of last week, helped by the substantial territorial gains made by Ukrainian troops over the weekend.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.4% higher, CAC 40 futures in France climbed 0.6% and the FTSE 100 futures contract in the U.K. rose 0.2%.

Ukraine has retaken more than 3,000 sq km (1,160 sq miles) this month, Ukrainian chief commander General Valeriy Zaluzhnyi said on Sunday, with most of this ground being taken thanks to a rapid weekend offensive that forced Russia to abandon its main logistics hub in the Kharkiv region.

After months of stalemate, these swift maneuvers will give the markets room to reconsider the range of outcomes. Prolonged attrition remains one option, but an earlier-than-expected end to the conflict has entered the equation.

European markets closed last week with healthy gains as September started on a positive note, and this tone is expected to continue Monday.

U.K. manufacturing production grew 0.1% on the month in July, data showed Monday, an improvement from the drop of 1.6% the previous month, while industrial production fell 0.3%, better than the drop of 0.9% in June.

That said, a lot of attention will be focused on the release of the latest reading of U.S. consumer prices on Tuesday, which is expected to show an easing of inflation in August. 

This could give the Federal Reserve food for thought ahead of next week’s policy-setting meeting, with the U.S. central bank expected to deliver its third consecutive rate increase of 75 basis points in an attempt to curb this high inflation.

The European Central Bank raised its key deposit rate to 0.75% from zero on Thursday and President Christine Lagarde guided for another two or three hikes in an attempt to bring inflation at record levels back to the bank’s targeted 2%.

In corporate news, Philips (AS:PHG) is likely to be in the spotlight after the Dutch press reported that the shareholders association VEB is threatening to take the conglomerate to court over its handling of a worldwide recall of respiratory machines.

Swiss Re (SIX:SRENH) said global geopolitical tensions, macroeconomic developments and climate change have heightened demand for risk protection and will lead to increased premiums.

Oil prices fell Monday, as traders weighed up aggressive monetary policy tightening, China's COVID-19 curbs as well as the rapid weekend offensive by Ukrainian troops.

Trade data, released last week, showed that Chinese oil imports slowed substantially in August due to COVID-related disruptions in the economy, raising fears of substantial demand destruction as the year progresses from the largest importer in the world. 

By 02:00 ET (06:00 GMT), U.S. crude futures traded 1.2% lower at $85.23 a barrel, while the Brent contract fell 1.1% to $91.83. 

Additionally, gold futures fell 0.3% to $1,722.55/oz, while EUR/USD traded 0.5% higher at 1.0086.