European stock futures higher; confidence in banking sector emerges

By Peter Nurse 

Investing.com - European stock markets are expected to open higher Tuesday as signs of confidence returning to the banking sector emerge ahead of the start of the latest Federal Reserve policy-setting meeting.

At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 1.1% higher, CAC 40 futures in France climbed 0.6% and the FTSE 100 futures contract in the U.K. rose 0.5%.

Investors have taken some heart from the rescue of troubled lender Credit Suisse (SIX:CSGN) by its Swiss rival UBS (SIX:UBSG), with UBS’s shares closing trade on Monday higher after sharp early losses were pared by the end of the day.

There remain concerns about the risk of shockwaves on smaller U.S. banks, as well as potential ructions in the bond markets after the losses imposed on Credit Suisse’s junior bondholders.

Attention is now on this week's meeting of the Federal Reserve, with its two-day get-together starting later this session. The turmoil in the banking sector has created a degree of uncertainty over whether the U.S. central bank will continue to lift interest rates to fight elevated inflation.

European Central Bank President Christine Lagarde implied on Monday that the current financial market disorder could mean that the central bank can stop hiking interest rates earlier than previously expected. 

"Clearly financial stability tensions might have an impact on demand and might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes," Lagarde told European lawmakers.

The ECB raised its benchmark interest rates by 50 basis points to 3% last week, and Lagarde reaffirmed that the inflation outlook alone would warrant more rate hikes.

The main economic release due Tuesday will be Germany’s ZEW survey of economic sentiment for March, which is expected to show a drop to 17.1 from 28.1.

In corporate news, RWE (ETR:RWEG) will be in the spotlight after Germany's largest utility announced plans to increase its dividend even as it expects operating profit to fall in 2023, citing lower margins at its gas-fired power plans.

Oil prices fell Tuesday as market confidence remained frail after a week of turmoil in the banking sector and ahead of a Federal Reserve interest rate decision this week.

The American Petroleum Institute is scheduled to release its estimate of U.S. crude inventories later in the session. They rose by just over 1 million barrels last week, resuming their climb after a one-week decline,

The API numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

By 03:00 ET, U.S. crude futures traded 0.6% lower at $67.44 a barrel, while the Brent contract dropped 0.6% to $73.36. 

Additionally, gold futures fell 0.1% to $1,980.00/oz, while EUR/USD traded 0.1% lower at 1.0708.