By Peter Nurse
Investing.com - European stock markets are expected to open in a cautious manner Thursday, as investors digest the latest red-hot U.S. inflation release, cementing interest rate hikes by the Federal Reserve this year,
At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.3% and the FTSE 100 futures contract in the U.K. fell 0.1%.
The U.S. consumer price index rose 7% in the 12 months through December, the biggest annual increase since 1982, influenced by supply chain disruptions, labor shortages and strong stimulus-boosted household balance sheets.
This release cemented expectations for repeated interest rate hikes in the coming 12 months, and followed Federal Reserve Chairman Jerome Powell pledging to curb inflation without derailing the economic recovery in his renomination testimony on Capitol Hill earlier this week.
The U.S. central bank is widely expected to hike interest rates at least three times this year, perhaps as soon as March, and the inflation news did little to change that narrative.
Back in Europe, there are a number of ECB policy makers due to speak later Thursday, but this central bank is not seen as being close to raising interest rates due to the Eurozone's different labor market conditions and the greater fragility of recoveries in countries such as Italy.
Germany reported over 80,000 coronavirus cases on Wednesday, a new daily record, prompting new Chancellor Olaf Scholz to suggest compulsory injections for all adults. Greece is set to extend some restrictions, Denmark is to offer a fourth vaccination to vulnerable citizens, while U.K. Prime Minister Boris Johnson is struggling to maintain his position after admitting that he broke his own restrictions.
In corporate news, Swiss plumbing parts manufacturer Geberit (SIX:GEBN) reported a rise of 6.7% in fourth-quarter sales, as the construction market continued its recovery towards the end of 2021.
Additionally, the U.K. retail sector is likely to be in focus, with Tesco (OTC:TSCDY), Marks & Spencer (OTC:MAKSY) and ASOS (LON:ASOS) all releasing trading statements covering the important festive period.
Oil prices edged lower, with traders pocketing some of the recent gains amid uncertainty over the impact of the surge in Omicron Covid cases on overall global demand.
Data from the U.S. Energy Information Administration, released on Wednesday, showed a drawdown of 4.5 million barrels in crude inventories last week, much larger than expected, with stockpiles at their lowest since October 2018.
However, that bullish news has been tempered by gasoline stockpiles increasing by a hefty 8 million barrels, suggesting fuel demand has taken a hit from Omicron.
By 2:05 AM ET, U.S. crude futures traded 0.5% lower at $82.20 a barrel, while the Brent contract fell 0.5% to $84.22. Both contracts jumped well over 1% in the previous session.
Additionally, gold futures fell 0.2% to $1,824.40/oz, while EUR/USD traded largely flat at 1.1443.