European Stock Futures Lower; German Retail Sales in Focus

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are expected to open lower Thursday, ending a tough month on a gloomy note, given concerns aggressive monetary tightening to curb inflation will cause a severe global economic slowdown.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.9% lower, CAC 40 futures in France dropped 1.1%, and the FTSE 100 futures contract in the U.K. fell 1%.

The major indices in Europe are on course to post significant losses this month with sentiment weak as the war in Ukraine shows no sign of ending anytime soon, the ECB is set to start raising interest rates to attempt to tackle soaring inflation and the economic recovery from the COVID pandemic struggles to take hold.

The DAX is on course to drop just under 10% in June, the CAC 40 is currently down almost 7%, while the FTSE 100 is around 4% lower.

European Central Bank President Christine Lagarde warned in a speech at the central bank’s annual forum this week that inflation in the Eurozone is "undesirably high," and the central bank will go "as far as necessary" to bring inflation back down to its 2% target.

French consumer inflation data for May are due later in the session, ahead of Friday’s Eurozone release, and the official number is set to remain well over four times above the central bank’s target after the German release topped about 8% on Wednesday and the Spanish number actually hit 10% on an annual basis.

Federal Reserve chair Jerome Powell, speaking at the ECB forum, warned that a broader economic slowdown could be a "likely" outcome from the aggressive monetary policy actions aimed at curbing the soaring prices.

Evidence of this slowdown was seen in the latest German retail sales data, which dropped 3.6% on the year in May, ahead of the release of the country’s unemployment rate for June.

Oil edged higher Thursday, but is still on course for its first monthly loss this year ahead of the latest meeting of top crude-producing countries.

The Organization of Petroleum Exporting Countries and allies is widely expected to confirm another modest production increase for August later Thursday, with limited room for a significant boost to output, given the group has struggled to meet its previously agreed production targets this year.

U.S. crude inventories fell by about 2.8 million barrels in the week to June 24, data from the Energy Information Administration showed, but gasoline stockpiles climbed as near-record prices likely encouraged people to stay closer to home.

By 2 AM ET, U.S. crude futures traded 0.2% higher at $110.00 a barrel, on course for a monthly loss of over 4%, while the Brent contract rose 0.3% to $112.75, set to drop over 2% in July.

Additionally, gold futures fell 0.1% to $1,816.65/oz, while EUR/USD traded 0.2% higher at 1.0454.