By Peter Nurse
Investing.com - European stock markets are expected to open with small gains Monday, starting the week that includes a host of central bank meetings, including the all-important Federal Reserve, with cautious optimism.
At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 0.3% higher, CAC 40 futures in France climbed 0.5% and the FTSE 100 futures contract in the U.K. rose 0.3%.
Global equity markets turned higher last week, boosted by studies suggesting the Omicron variant of the Covid-19 virus caused less serious damage in patients than previous versions and current vaccines, including boosters, could cope with the variant.
This confidence could be tested this week as a number of high profile central banks hold their monetary policy meetings, including the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank.
It’s the Fed that investors will pay particular attention to as expectations have been building that the U.S. central bank will announce a quicker phase-out of its bond purchases on Wednesday after Chairman Jerome Powell’s hawkish testimony to Congress.
“Yes, a faster taper looks very likely, but what lies beyond next week’s decision is extremely interesting,” said analysts at Nordea, in a note. “The updated economic and interest rate forecasts in the form of the so-called dot plot will tell us a lot about this.”
Central banks meeting this week will have to account for an uncertain economic outlook, as countries impose restrictive measures to curb the spread of the Omicron Covid-19 variant. British Prime Minister Boris Johnson, under pressure from his own staff's flouting of social distancing rules, warned on Sunday that the U.K. faces a “tidal wave” of infections.
Meanwhile, geopolitical tensions are on the rise after the Group of Seven warned Russia on Sunday that it would face “massive consequences” if it invades Ukraine.
U.S. intelligence has warned that Russia could be planning an offensive on Ukraine as early as next year, involving up to 175,000 troops.
In corporate news, Air France KLM (OTC:AFLYY) announced Monday that it has redeemed 500 million euros ($565 million) from an earlier French state loan issued to help the airline cope with the pandemic, and it could also raise new equity.
Oil prices rose Monday, extending recent gains on optimism that vaccine boosters will be able to combat the Omicron variant to the extent that its spread doesn’t lead to a significant hit to global crude demand.
By 2 AM ET, U.S. crude futures traded 1.6% higher at $72.78 a barrel, while the Brent contract rose 1.3% to $76.16. Both benchmarks rose around 8% last week, their first weekly gain in seven.
Additionally, gold futures edged lower to $1,784.20/oz, while EUR/USD traded 0.2% lower at 1.1285.