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European Stock Futures Higher on Tempered Fed Hike Expectations

Stock Markets May 05, 2022 07:28
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By Peter Nurse - European stock markets are expected to open higher Thursday, tracking the sharp gains on Wall Street after the Federal Reserve raised interest rates by 50 basis points but tempered expectations for even larger future increases.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.4% higher, CAC 40 futures in France climbed 2.3%, and the FTSE 100 futures contract in the U.K. rose 1.1%.

The U.S. central bank raised the benchmark interest rate by a half-point on Wednesday and said it would start tapering its $9 trillion bond portfolio in June in order to combat inflation currently running at levels not seen in four decades.

This was its biggest hike in two decades but was widely expected, and Fed chief Jerome Powell also stated that larger hikes were not under consideration, allaying some investors’ fears that the central bank would raise rates by 75 basis points in upcoming meetings, potentially tipping the world’s largest economy into recession.

Investors reacted positively to his comments, with the blue-chip Dow Jones Industrial Average gaining almost 1,000 points, or 2.8%, the broad-based S&P 500 rose 3% and the tech-heavy Nasdaq Composite climbed 3.2%.

Back in Europe, attention turns to the Bank of England, which is also expected to raise its benchmark rate by 25 basis points, its fourth consecutive hike to try and curb soaring consumer prices.

Thursday is also another busy day in Europe for quarterly corporate earnings. 

Anheuser-Busch InBev (EBR:ABI), the world’s largest brewer, reported higher than expected earnings in the first quarter as consumers accepted higher prices.

Air France KLM (EPA:AIRF) pointed to a successful summer season, fueled by a recovery in ticket sales, but Germany's flag carrier Deutsche Lufthansa (ETR:LHAG) reported a bigger-than-expected quarterly loss on Thursday, as rising fuel costs canceled out revenue gains from booming travel demand.

Societe Generale (OTC:SCGLY), France’s third-biggest listed bank, announced higher provisions as a result of the war in Ukraine, while Credit Suisse (SIX:CSGN) expects a Bermuda court case to cost it around $600 million, putting more flesh on to earlier remarks that damages could be well in excess of $500 million.

Oil prices edged higher Thursday, adding to the previous session’s gains after the European Union, the world's largest trading bloc, outlined plans to end its dependence on Russian oil.

The proposal, announced by European Commission President Ursula von der Leyen on Wednesday, includes phasing out supplies of Russian crude in six months and refined products by the end of 2022.

The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, will meet later in the day and is widely expected to agree to raise production targets by just over 400,000 barrels a day for June. 

By 2:05 AM ET, U.S. crude futures traded 0.9% higher at $108.72 a barrel, while the Brent contract rose 1% to $111.25, after both benchmarks gained more than $5 a barrel on Wednesday.

Additionally, gold futures rose 1.6% to $1,899.54/oz, while EUR/USD traded 0.1% lower at 1.0611.

European Stock Futures Higher on Tempered Fed Hike Expectations

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