European Stock Futures Lower; UBS Disappoints With 2Q Earnings

By Peter Nurse

Investing.com - European stock markets are expected to open with small losses Tuesday, weighed by disappointing earnings from Swiss banking giant UBS but investors remain wary as the Federal Reserve starts its crucial policy-setting meeting.

At 02:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.3%, and the FTSE 100 futures contract in the U.K. fell 0.1%.

The second-quarter earnings season kicks into top gear in Europe this week, with UBS (SIX:UBSG) starting a round of earnings by major banks as investors watch for signs that a weaker economy, higher interest rates and the war in Ukraine are weighing on their operations and outlooks.

The news so far isn’t positive, as the Swiss lender posted a smaller-than-expected 5% rise in net profit for the second quarter as revenues at its investment bank fell 14% during what CEO Ralph Hamers called one of the “most challenging” quarters for investors in the last decade. He added the operating environment in the second half of the year "remains uncertain".

Still, stock market losses are unlikely to be severe as investors focus on the start of the U.S. Federal Reserve two-day policy-setting meeting later Tuesday.

The U.S. central bank is widely expected to hike by at least 75 basis points, after an increase of 100 basis points last time, with inflation remaining elevated.

The FOMC statement and accompanying press conference by Fed Chair Jerome Powell will also be studied carefully amid fears that these sharp interest rate rises will plunge the world’s largest economy and major global growth driver into recession.

A profit warning from Walmart (NYSE:WMT) late on Monday, with the retail giant pointing to customers cutting back on discretionary spending, was the latest sign that economic growth is slowing rapidly.

Back in Europe, on a more positive note, Swiss chocolate maker Lindt & Spruengli (SIX:LISN) raised its sales guidance and unveiled a 1 billion Swiss franc ($1.04 billion) share buyback program after first-half net profit jumped 36%.

Oil prices rose Tuesday on increasing concerns over Europe’s energy supply after Russia announced a further reduction in the amount of natural gas pumped to the region, potentially encouraging a switch to crude.

Gazprom, the Russian state-owned energy giant, stated Monday that supplies through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity, just days after restoring the output to some 40% of capacity after finishing scheduled maintenance work.

U.S. crude supply data from the American Petroleum Institute will be in focus later in the session.

By 02:00 AM ET, U.S. crude futures traded 1.5% higher at $98.11 a barrel, while the Brent contract rose 1.6% to $101.72.

Additionally, gold futures rose 0.1% to $1,720.65/oz, while EUR/USD edged lower to 1.0218.