Market Analytics and Considerations
Key notes
Following recent weakness, European stock markets are anticipated to open slightly stronger on Monday. Investor attention will be focused on the German Ifo business conditions index as an indicator of the health of the main economy in the Eurozone.
The DAX futures contract in Germany, the CAC 40 futures contract in France, and the FTSE 100 futures contract with in United Kingdom all opened 0.1% up at 02:00 ET/07:00 GMT.
After the European Central Bank slowed the pace of its rate increases but stressed that significant tightening lay ahead as it battles rising inflation, European markets took substantial losses last week, with the German DAX about 3% down.
Klaas Knot, a member of the ECB’s governing council, stated on Friday that although the central bank has a longer way to go before hiking borrowing costs than the Federal Reserve, it ultimately won’t do that to the same degree.
The prospect of further interest rate increases and the probability of slowing economic activity have impacted market morale, although later in the day, the German Ifo economic outlook index for December is expected to show some recovery.
The revelation comes after last week’s PMI data revealed that the decline in German business growth has slowed for a second consecutive month, suggesting that the bloc’s inevitable recession will be shorter than originally anticipated.
The Biden administration’s decision to start replenishing its strategic stockpiles and the expectation of rising Chinese demand in the coming year both helped drive up the price of crude oil on Monday.
After reducing the Strategic Petroleum Reserve to its lowest level in over 40 years in an effort to stop this year’s fuel price hikes, the U.S. government announced on Friday that it will first purchase 3 million barrels of crude oil for its stockpile.
Furthermore, China has dropped its tight “COVID-zero” stance, and while the second-largest oil user and leading importer of crude oil globally is seeing a rise in new cases as it finally opens, there is growing optimism that business investment will start picking up in 2023.
By 2:00 ET, Brent crude prices were up 0.3% to $79.30, while U.S. crude futures were trading 0.4% higher at $74.75 per barrel. Both contracts were still trading close to their one-year low points after experiencing substantial reductions lately due to concerns about a weak economy in 2023.
Gold futures also increased by 0.1% to $1,800.85/oz, and the EUR/USD traded 0.5% stronger at 1.0631.
