European Stock Futures Higher; Positive China COVID News Helps Tone

© Reuters

By Peter Nurse 

Investing.com - European stock markets are expected to open marginally higher Monday, helped by gains in Asia as major Chinese cities begin to ease mobility restrictions, although the Memorial Day holiday in the U.S. could limit activity.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.3% higher, CAC 40 futures in France climbed 0.4%, and the FTSE 100 futures contract in the U.K. rose 0.4%.

Equity markets in Europe posted gains last week, following the positive tone on Wall Street as investors were buoyed by hints the Federal Reserve, once it has hiked aggressively over the next two months, might then slow its tightening.

Adding to this relative optimism have been gains in Asia, with both the Nikkei in Japan and Hong Kong’s Hang Seng up over 2%, boosted by the news that curbs on movement in key regions of China were loosened over the weekend.

Shanghai is aiming to exit a two-month COVID lockdown on June 1, while Beijing reopened some parts of public transport on Sunday as well as some malls as infections stabilized.

Strict movement restrictions in key Chinese cities have severely hit the nation’s economy, the second largest in the world and a key export market for a number of European companies.

Back in Europe, German and Spanish consumer inflation data are due later Monday, and will be studied carefully ahead of Tuesday’s release of the latest Eurozone inflation flash estimate. 

Economists expect the consumer price index to hit another record high of 7.7% in May, up from 7.4% in April, which would largely cement expectations for policy normalization at the ECB, starting in the summer.

Eurozone business and consumer sentiment survey data for the month of May are also due for release this session and are likely to show a weakening of confidence as prices rise and the war in Ukraine continues.

Oil prices climbed Monday, trading at new two-month highs ahead of a meeting of European Union countries to discuss a sixth package of sanctions against Russia as punishment for its invasion of Ukraine.

The EU starts a two-day meeting later in the session and is expected to discuss the banning of seaborne deliveries of Russian oil while allowing deliveries by pipeline. Such a deal could placate the likes of Hungary, Slovakia, and Czechia as they would continue to receive their Russian crude, giving them time to search for alternative supplies.

Any further ban on Russian oil would tighten a crude market already strained for supply amid rising demand as the peak summer demand season in the United States and Europe draws near.

By 2 AM ET, U.S. crude futures traded 0.7% higher at $115.91 a barrel, while the Brent contract rose 0.7% to $116.34.

Additionally, gold futures rose 0.5% to $1,860.10/oz, while EUR/USD traded 0.3% higher at 1.0754.