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European Stocks Lower; Caution Ahead of Key U.S. Inflation Data logo 1/10/2022
European Stocks Lower; Caution Ahead of Key U.S. Inflation Data © Reuters European Stocks Lower; Caution Ahead of Key U.S. Inflation Data

By Peter Nurse - European stock markets edged lower Monday, with investors wary at the start of a week that includes the release of key U.S. inflation data and comments from Federal Reserve Chairman Jerome Powell.

At 4:20 AM ET (0920 GMT), the DAX in Germany traded 0.2% lower, the CAC 40 in France dropped 0.2% and the U.K.’s FTSE 100 fell 0.1%.

European stock markets are trading against a backdrop of a rapid spread of the Omicron variant of the Covid-19 virus over the holiday period, with the healthcare systems in many European countries stretched almost to the limit.

In corporate news, Credit Suisse (SIX:CSGN) stock climbed 1.7% amid speculation that the beleaguered Swiss bank may be looking for a buyer. UniCredit (MI:CRDI) and BNP Paribas (PA:BNPP) have been touted as potential buyers, but both have declined to comment.

The banking sector as whole could be in focus this week, with several large U.S. banks, including JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), set to release fourth-quarter earnings on Friday. 

Elsewhere, Idorsia (SIX:IDIA) stock rose 4% after the Swiss drugmaker said it has received U.S. Food and Drug Administration approval for its treatment for insomnia in adult patients.

Global stock markets will be focusing squarely on the latest U.S. inflation data this week, with strong numbers potentially cementing an early rate hike from the Federal Reserve.

The consumer price inflation data, on Wednesday, is expected to show headline CPI breaking above 7% year-on-year, approaching a four-decade high, while producer price inflation data the following day is also expected to show a surge higher.

Additionally, Fed Chairman Jerome Powell is scheduled to testify Tuesday before a Senate panel at his nomination hearing, and his comments will be parsed carefully for clues as to the central bank’s intentions.

The Fed is expected to lift interest rates well before its Eurozone counterpart, with influential investment bank Goldman Sachs (NYSE:GS) now seeing the U.S. central bank raising interest rates four times this year. Even so, annual inflation in the Eurozone hit 5.0% last week, a new record high, raising the pressure on the European Central Bank to tighten its own monetary policy.

UBS (SIX:UBSG) Chairman Axel Weber said, at a conference earlier Monday, that inflation was staying "stubbornly high" in the United States and may continue to surprise on the upside in major areas like Europe and the United Kingdom.

Oil prices stabilized Monday after the sharp gains of the previous week, as operator Chevron said Sunday that Kazakhstan's largest oil venture, Tengizchevroil, is gradually returning to normal production levels after recent protests limited output.

Supply outages in places like Kazakhstan and Libya have thrown the spotlight on global supply, superseding concerns that the spread of the Omicron coronavirus variant might hurt demand.

By 4:20 AM ET, U.S. crude futures traded 0.5% higher at $79.31 a barrel, while the Brent contract rose 0.5% to $82.15. Both contracts posted gains of around 5% in the first week of the year.

Additionally, gold futures fell 0.1% to $1,797.00/oz, while EUR/USD traded 0.2% lower at 1.1339.


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