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European Stock Futures Lower; Rising U.S. Treasury Yields Weigh

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By Peter Nurse – European stock markets are expected to open marginally lower Wednesday, handing back some of the recent gains with higher U.S. Treasury yields weighing on the tech sector. 

At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.1% and the FTSE 100 futures contract in the U.K. fell 0.2%.

European indexes had started the new year on the front foot, with the pan-European STOXX 600 index climbing to an all-time high amid optimism about the global economic recovery.

However, Europe is expected to follow the broadly negative tone in Asia overnight with investors fretting about rising U.S. Treasury yields and the impact this will have on the highly leveraged tech sector, the source of most of the gains on Wall Street over the last few years.

Benchmark U.S. 10-year Treasury yields touched a six-week high on Tuesday, five-year rates hit a pandemic-era high, and two-year note yields hit their highest since March 2020 on Monday.

This comes as much of Europe struggles to contain the latest wave of Covid-19 cases.

Data releases in Europe on Wednesday center around final PMI data for the Eurozone’s services and manufacturing industries in December, which may provide early signals of the problems Omicron has caused.

Additionally, investors looking for clues as to when the Federal Reserve announces its first interest-rate hike will study the minutes of the central bank’s meeting last month closely when they are released later in the session.

Oil prices stabilized Wednesday as traders digested rising U.S. crude stockpiles at the same time as a group of top producers gradually lifted global output.

Data from the American Petroleum Institute, released on Tuesday, showed a draw of 6.4 million barrels of crude for the week ended Dec. 31, significantly more than expected, while gasoline inventories rose by a hefty 7.1 million barrels.

U.S. crude oil supply data from the U.S. Energy Information Administration are due later Wednesday.

Earlier Tuesday, the Organization of the Petroleum Exporting Countries and allies, a group called OPEC+, decided to stick to its plan of increasing output by 400,000 barrels per day in February, suggesting confidence that overall demand wouldn’t be hit too badly by the fresh Covid outbreak.

By 2:05 AM ET, U.S. crude futures traded 0.1% higher at $77.03 a barrel, while the Brent contract rose 0.1% to $80.07. 

Additionally, gold futures fell 0.1% to $1,813.95/oz, while EUR/USD traded 0.1% higher at 1.1299.


European Stock Futures Lower; Rising U.S. Treasury Yields Weigh

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