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European Stocks Seen Lower; Global Recovery Hopes Dim

Published 09/24/2020, 02:04 AM
Updated 09/24/2020, 02:05 AM
© Reuters.

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are seen opening lower Thursday, following substantial losses on Wall Street overnight, with investors fretting about the global recovery after a series of warnings from U.S. Federal Reserve officials.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.3% lower, CAC 40 futures in France dropped 1% and the FTSE 100 futures contract in the U.K. fell 0.9%. 

At the close in New York overnight, the Dow Jones Industrial Average lost 1.9% to hit a new one-month low, while the S&P 500 fell 2.4%, and the NASDAQ Composite index fell 3%.

Weighing heavily on market sentiment were comments from Fed Chairman Jerome Powell who reiterated the U.S. economy, the world’s driver, had a long way to go before recovery, and would likely require more support to get there. He was backed up by the likes of Fed Vice Chair Richard Clarida, who said the U.S. economy remains in a "deep hole" of joblessness and weak demand.

However, more fiscal support looks extremely unlikely before the November elections, as Congress now seems to be focusing on the battle to replace the late Ruth Bader Ginsburg on the Supreme Court.

Adding to the woes was evidence of the slowing recovery, as PMI data showed U.S. business activity slowed in September. This weakness wasn’t confined to America, as the recovery of activity also stalled in Europe with the number of new Covid-19 cases flaring up again.

“The impact of second wave-related weakness does lead us to think that the recovery is under more pressure than previously thought,” wrote ING’s Bert Colijn, in a research note. “For governments and European Central Bank, this will be a wake-up call, if they needed one.”

Investors will focus on the key German Ifo Business Climate index to gauge the sentiment in Europe’s most important economy later Thursday, ahead of important weekly U.S. employment data.

In corporate news, Airbus may be in the spotlight following a Bloomberg report that Delta Air Lines is in talks with the European plane maker to delay the delivery of at least 40 aircraft that were set to be handed over this year.

Oil prices weakened Thursday despite official data showing crude inventories falling by 1.6 million barrels last week, on concerns the economic recovery in the United States, the world's biggest oil consumer, is slowing.

Weighing heavily was Wednesday’s PMI data, which showed business activity slowed in September, with gains in the manufacturing sector more than offset by a retreat in services industries.

U.S. crude futures traded 0.6% lower at $39.65 a barrel, while the international benchmark Brent contract fell 0.4% to $41.60. 

Elsewhere, gold futures fell 0.6% to $1,858.05/oz, while EUR/USD traded largely flat at 1.1660, having hit a two-month low on Wednesday.

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