European Stock Futures Largely Flat; Fed Meeting Looms Large

By Peter Nurse 

Investing.com - European stock markets are expected to open largely unchanged Monday, with investors wary as the Federal Reserve takes center stage this week amid expectations for another big hike at this week’s policy-setting meeting.

At 02:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.1% higher, CAC 40 futures in France climbed 0.1%, while the FTSE 100 futures contract in the U.K. traded flat.

The European Central Bank claimed the spotlight last week, raising interest rates by a hefty 50 basis points on Thursday, its first increase in 11 years, and this week it’s the turn of the Federal Reserve.

The U.S. central bank is widely expected to hike by at least 75 basis points with inflation remaining elevated. The FOMC statement and accompanying press conference by Fed Chair Jerome Powell will also be studied carefully as the market tries to gauge the possibility this aggressive tightening will plunge the world’s largest economy and major global growth driver into recession.

U.S. Treasury Secretary Janet Yellen said on Sunday that U.S. economic growth is slowing and she acknowledged the risk of a recession, but she said a downturn was not inevitable.

Growth is already starting to slow in Europe, with data released Friday showing the Eurozone composite purchasing managers index slipped back into contraction territory for the first time since March 2021.

Monday’s major data release will be the German Ifo business climate index for July, at 04:00 AM ET (0800 GMT), which is expected to fall to 90.2, from 92.3 in June, as sentiment deteriorates in the Eurozone’s largest economy.

In corporate news, Ryanair (IR:RYA), Europe's largest airline by passenger numbers, reported an after-tax profit of €170 million ($174 million) for the three months to the end of June, its first profit in the quarter in three years but well short of pre-COVID-19 profit levels.

Dutch medical equipment maker Philips (AS:PHG) reported a bigger-than-expected drop in second-quarter core earnings to €216 million ($220 million), citing supply shortages and lockdowns in China.

Swiss wealth manager Julius Baer (SIX:BAER) reported a 26% drop in shareholders' profit for the first half of 2022, while logistics group Kuehne&Nagel (SIX:KNIN) reported a 79% rise in its second-quarter net profit, citing growth in all business units despite volatile supply chains.

Oil prices fell Monday, continuing the recent selloff as traders fret that this week’s Fed meeting will see more monetary tightening, hitting global economic growth and thus crude demand.

Also weighing was news of additional supply, as Libya’s National Oil Corporation stated over the weekend that it is aiming to bring back production to 1.2 million barrels per day in two weeks. 

The OPEC member’s output has been severely hit by a power struggle between rival governments and chronic under-investment in infrastructure. 

By 02:00 AM ET, U.S. crude futures traded 0.9% lower at $93.83 a barrel, while the Brent contract fell 0.9% to $97.52. Both contracts are lower for the fourth consecutive session.

Additionally, gold futures fell 0.3% to $1,722.95/oz, while EUR/USD traded 0.1% lower at 1.0199.