European stock futures mixed; cautious start to the new week

By Peter Nurse 

Investing.com - European stock markets are expected to trade in a mixed fashion at the open Monday, starting the new week on a cautious note amid doubts about the region's economic recovery. 

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.2% lower, the FTSE 100 futures contract in the U.K. fell 0.2%, while CAC 40 futures in France climbed 0.4%.

The main European indices followed their U.S. peers sharply higher last week, with the benchmark S&P 500 index posting its biggest weekly gain in almost five months, after U.S. consumer prices rose less than expected in October, lifting hopes that the Federal Reserve will slow its aggressive monetary tightening campaign.

However, Fed Governor Christopher Waller attempted to rein in this optimism on Sunday, saying the markets shouldn't get carried away over just one "data point." 

Adding the Fed may consider slowing the pace of rate increases at its next meeting but that should not be seen as a "softening" of its battle against inflation.

Back in Europe, the European Central Bank still has some way to go before it catches up with the extent of the Fed’s tightening, while inflation in the region is still climbing.

The United States might just avoid falling into recession next year, thanks to a resilient job market, analysts at Morgan Stanley said, in a note, but Britain and the Eurozone economies are unlikely to be so lucky.

"Risks are to the downside," the bank said, forecasting the global economy to grow by 2.2% next year, lower than the International Monetary Fund's latest 2.7% growth estimate.

Data due later Monday is expected to show Eurozone industrial production rising just 0.3% on the month in September, substantially slower growth than the 1.5% rise seen the previous month.

Attention will also be on the U.K. government's new fiscal plan on Thursday, especially after the car crash that was September's mini budget. U.K. Chancellor Jeremy Hunt has indicated that around £60 billion (£1=$1.1837) in tax increases and spending cuts are coming to tackle a gaping hole in the public finances.

Turning to the corporate sector, there is little in the way of major corporate earnings to digest, but Rheinmetall (ETR:RHMG) will be in the spotlight after the German military equipment manufacturer agreed to acquire Spanish ammunition maker Expal Systems for €1.2B.

Oil prices edged lower Monday, handing back some of the recent gains as the U.S. dollar strengthened, making the commodity more expensive for foreign buyers.

Crude prices had rallied sharply on Friday, posting gains of around 3%, after China’s health authorities had cut the quarantine period for incoming travelers, raising hopes of a more substantial relaxation of the country’s Zero-COVID policy.

However, the number of reported cases in China climbed over the weekend, making it difficult for the country’s government to adjust its strict policy as winter approaches.

By 02:00 ET, U.S. crude futures traded 0.4% lower at $88.61 a barrel, while the Brent contract fell 0.3% to $95.66.

Additionally, gold futures fell 0.2% to $1,765.65/oz, while EUR/USD traded 0.3% lower at 1.0325.