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European Stock Futures Higher; ECB Meeting, U.S. CPI in Focus

Published 06/06/2022, 02:01 AM
Updated 06/06/2022, 02:02 AM
© Reuters

By Peter Nurse - European stock markets are expected to open higher Monday as investors gear up for an important week, with the European Central Bank meeting to discuss policy normalization and the release of the latest U.S. inflation data.

At 2 AM ET (0600 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 0.7%.

European equities ended last week on a negative note, although volumes were low with the U.K. on holiday, as data showed the U.S. economy added 390,000 jobs in May. This was more than expected and prompted investors to reassess the potential for rising interest rate hikes by the Federal Reserve in the months ahead.

With this in mind, investors are keenly awaiting the release of Friday’s U.S. CPI report for May as this will act as a key input before the Fed decides how much to hike rates next week. 

Core inflation, which excludes volatile energy and fuel prices, is expected to come in at 5.9% year-over-year, which would mark a third month of consecutive declines and make the case that core inflation may have peaked.

Ahead of this, the European Central Bank meets on Thursday and is expected to use this get-together to make clear that rate hikes will be coming in the third quarter.

ECB President Christine Lagarde outlined her plan a couple of weeks ago to raise rates out of negative territory, suggesting the central bank's minus 0.5% deposit rate should start rising in July and could be at zero or "slightly above" by the end of September before rising further "towards the neutral rate."

Helping the tone Monday was an improvement in Chinese service sector activity in May, with the country’s Caixin index improving to 41.4 from 36.2 in April. That said, the reading stayed below the 50-point mark that separates growth from contraction, suggesting a slow recovery in the world’s second largest economy.

In corporate news, easyJet (LON:EZJ) is likely to be in the spotlight after the low-cost carrier canceled 80 flights on Sunday due to the ongoing challenging operating environment.

Earlier in May, the airline had canceled over 200 flights due to airport delays and other restrictions impacting travel during school holidays.

Oil climbed Monday after Saudi Arabia substantially raised prices for its crude sales in July for Asian buyers, an indication that the world’s top oil exporter expects strong demand in the summer while supply remains very tight. 

The price hike came despite a decision last week by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, to increase output in July and August by 648,000 barrels per day, 50% more than previously planned.

By 2:05 AM ET, U.S. crude futures traded 0.4% higher at $119.38 a barrel, after earlier hitting a three-month high, while the Brent contract rose 0.5% to $120.28.

Additionally, gold futures rose 0.4% to $1,857.10/oz, while EUR/USD traded 0.1% higher at 1.0724.

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