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European Stock Futures Sharply Lower; Fed Minutes Point to Early Hike

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By Peter Nurse – European stock markets are expected to open sharply lower Thursday, extending the global selloff after minutes from the Federal Reserve’s December meeting pointed to early interest rate hikes amid inflation concerns. 

At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 1.5% lower, CAC 40 futures in France dropped 1.8% and the FTSE 100 futures contract in the U.K. fell 1.4%.

European indexes, like their Asian counterparts, are set to take their lead from the sharp selloff on Wall Street late Wednesday, with the tech-heavy Nasdaq Composite plunging more than 3% in its biggest one-day percentage drop since February. The broad-based S&P 500 also fell almost 2%, its biggest daily percentage decline since late November.

These losses followed the publication of minutes from the latest Federal Reserve meeting, in which the policymakers said a “very tight” job market and elevated inflation might require the central bank to raise rates sooner than previously guided.

Private payrolls increased by over 800,000 last month, according to a report from ADP (NASDAQ:ADP) released Wednesday, more than double the expected number. Weekly jobless claims data are due later Thursday, ahead of Friday’s key nonfarm payrolls report.

Adding to Thursday’s woes, France reported a new record of Covid-19 cases, around a third of a million daily cases, while the likes of Portugal, Turkey, Italy and the Netherlands also registered record rises.  Italy has announced a vaccination mandate for all those over 50 years old.

German factory orders rose 3.7% on the month in November, a substantial improvement from October’s 6.9% slump, ahead of the release of Eurozone producer prices and German consumer prices.

In corporate news, Sodexo (PA:EXHO) is likely to be in the spotlight Thursday after the French catering and food services group reported a 17% jump in its first-quarter organic sales, helped by the reopening of schools and universities.

Oil prices fell Thursday after U.S. gasoline stockpiles surged last week, implying weakening demand at the world’s largest energy consumer.

Data from the U.S. Energy Information Administration showed U.S. crude inventories fell by just over 2 million barrels for the week ended Dec. 31, less than expected, while gasoline stockpiles surged more than 10 million barrels, the biggest weekly build since April 2020.

The rise in gasoline stocks suggested that the public is reluctant to travel, with the United States reporting nearly 1 million Covid-19 cases on Monday, setting a global record.

By 2 AM ET, U.S. crude futures traded 0.9% lower at $77.12 a barrel, while the Brent contract fell 1% to $80.03. Both contracts had climbed to their highest levels since late November on Wednesday after a group of top producers increased output, suggesting confidence over demand in the first quarter.

Additionally, gold futures fell 1.3% to $1,801.10/oz, while EUR/USD traded 0.2% lower at 1.1296.


European Stock Futures Sharply Lower; Fed Minutes Point to Early Hike

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