European stock markets are expected to open lower Thursday, hurt by deteriorating German economic confidence, while investors take a cautious stance ahead of a key meeting of policymakers from the Federal Reserve and other central banks.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.2% and the FTSE 100 futures contract in the U.K. fell 0.3%.
The September German GfK consumer climate index dropped to -1.2 earlier Thursday, falling from a revised -0.4 for August, indicating that sentiment is weakening in Europe’s main growth driver.
On Wednesday, the Ifo Institute’s influential business climate index fell for the second month in a row, with German manufacturers complaining about supply bottlenecks for intermediate products in manufacturing as well as fretting about rising Covid infection numbers. New infections hit a three-month high in Europe’s biggest market, according to data released on Wednesday.
Business confidence is on the way down in the U.K. too: a quarterly labor market survey by the Confederation of British Industry showed more companies complaining about labor shortages than ever before.
Adding to the sense of gloom was news that the European Union could reimpose restrictions on visitors from the U.S. on Thursday, a move that would weigh heavily on the region’s travel and leisure sector. The EU is upset that the U.S. hasn’t reciprocated after Europe loosened restrictions on visiting U.S. tourists earlier in the summer.
Oil fell on Thursday for the first session this week as renewed concerns about demand amid rising COVID-19 infections cut short a three-day rally, and as production returned in Mexico.
Brent crude was down 29 cents, or 0.4%, at $71.96 a barrel by 0649 GMT, having risen 1.7% on Wednesday.
U.S. oil was down 44 cents, or 0.6%, at $67.92 a barrel, after gaining 1.2% in the previous session.
The U.S. Energy Information Administration (EIA) reported that American crude inventories fell last week for a third consecutive week and overall fuel demand increased to the most since March 2020, boosting prices around 10% through Wednesday.
But the demand picture is not entirely bullish.
“For now, U.S. consumers appear to be shrugging off the spread of the Delta variant … However, it seems likely that we are near the peak in U.S. demand, which will act as a lid on oil prices,” Capital Economics said in a note.
Distillate stockpiles, which include diesel and jet fuel, rose last week, gaining 0.6 million barrels to 138.46 million barrels, against expectations for a 0.3 million-barrel drop, according to the EIA data. [EIA/S]
Gold was down on Thursday morning in Asia, with investors cautious ahead of a U.S. Federal Reserve symposium that could provide cues to a timeline for asset tapering.
Gold futures inched down 0.10% to $1,789.15 by 12:16 AM ET (4:16 AM GMT). They fell 0.7% during the previous session, the biggest one-day decline in more than two weeks.
“You’re probably going to see a continued consolidation in gold, but likely to the downside until we get past Jackson Hole,” OANDA senior market analyst Edward Moya told Reuters.
The Fed’s Jackson Hole symposium will open later in the day, with Fed Chairman Jerome Powell delivering a speech on Friday. Although an increasing number of Fed officials have signaled that asset tapering could begin earlier than expected, COVID-19 outbreaks globally continue to cloud the economic outlook and cast doubts over this view.
“Once we are beyond Jackson Hole the market is still going to anticipate that the Fed is going to taper asset purchases, but they’re going to disconnect interest rate hikes from that,” said Moya, adding that the low interest rate environment is likely to last longer and should support gold prices.
However, other central banks are ahead of the Fed, with the Bank of Korea (BOK) hiking its interest rate as it handed down its policy decision earlier in the day. BOK’s interest rate for August is 0.75%, up by 25 basis points from the previous 0.5% and within expectations, and South Korea is now the first major Asian economy to hike interest rates since COVID-19 began.
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