By Peter Nurse
Investing.com - European stock markets are seen opening lower Wednesday, amid cautious trading as investors digest comments from Federal Reserve Chairman Jerome Powell on another busy day for corporate earnings.
At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.5% lower, CAC 40 futures in France dropped 0.4% and the FTSE 100 futures contract in the U.K. fell 0.7%.
Fed chief Jerome Powell kept a dovish tone during his testimony before the Senate Banking Committee on Tuesday, as he attempted to ease some worries around higher interest rates and inflation.
Powell stated that the U.S. economy remained “a long way” from employment and inflation goals and that interest rates would stay low and bond buying would continue until there was “substantial further progress”.
However, despite Powell’s reassurance, some investors are beginning to pull forward their rate-hike expectations, predicting stronger-than-expected economic growth and a jump in inflation on the back of the proposed additional stimulus will prompt the central back to adjust its ultra-accommodative stance sooner than currently projected. Fed funds futures now project the first 25 basis point increase in the Fed's key rate by the end of 2022.
“We suspect that the pressure for change will build through the second quarter with a tapering of QE looking increasingly before year-end,” said analysts at ING, in a research note.
Turning back to Europe, the earnings season continues apace, with numbers expected from the likes of Accor (PA:ACCP), Wolters Kluwer (AS:WLSNc), Lloyds (LON:LLOY), William Hill (LON:WMH), Reckitt Benckiser (LON:RB) and Iberdrola (OTC:IBDRY).
On the data front, Germany has released a detailed picture of its fourth-quarter growth, positively surprising with growth of 0.3% on the quarter, a fall of 2.7% on the year.
Oil prices retreated Wednesday after U.S. stockpiles unexpectedly rose last week in the wake of the severe cold snap which hit Texas, the largest crude producing U.S. state, and the other southern states.
Although the wintry conditions shut in production across the region and left millions without power, it also stunted fuel demand from refineries that were forced to shut down.
U.S. crude inventories rose just over 1 million barrels last week, according to an estimate released Tuesday by the American Petroleum Institute, after a fall of 5.8 million barrels the previous week. The official supply numbers from the U.S. Energy Information Administration are due later Wednesday.
U.S. crude futures traded 0.4% lower at $61.41 a barrel, while the international benchmark Brent contract fell 0.2% to $64.38.
Elsewhere, gold futures rose 0.1% to $1,806.05/oz, while EUR/USD traded 0.1% higher at 1.2160.