By Peter Nurse
Investing.com - European stock markets are expected to open marginally lower Thursday, weighed by talk of the European Central Bank withdrawing its monetary stimulus amid caution over China’s regulatory clampdown and Friday’s key U.S. payrolls release.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.1% and the FTSE 100 futures contract in the U.K. fell 0.1%.
The rebound in the Eurozone economy, coupled with a sharp rise in inflation, has brought the subject of the ECB’s extraordinary monetary support back into debate, to the possible detriment of the region’s stock markets.
Earlier this week, inflation in the euro region jumped to 3%, well above the ECB’s goal, and this prompted Jens Weidmann, the head of the Bundesbank, to talk on Wednesday about scaling back this stimulus.
“We have to watch the risks to the outlook for prices. In my view, upside risks predominate,” the German central bank chief said.
While Weidmann and fellow hawks Robert Holzmann and Klaas Knot are typically in a minority on the ECB's governing council, the accounts of the ECB's last meeting included the clearest acknowledgement of excessive inflation risks since the start of the pandemic 19 months ago.
Adding to the reasons to be cautious was continued evidence of a regulatory crackdown in China, with the country’s regulators calling in 11 ride-hailing and delivery firms, including giants Didi (NYSE:DIDI) and Meituan (OTC:MPNGY), over allegations they are recruiting unapproved drivers and vehicles.
That said, China also announced support for small- and medium-sized firms to help ease their financing burdens.
Investors around the world are also warily gearing up for Friday’s release of the key August monthly U.S. employment report as this could guide future Federal Reserve policy.
Median forecasts are for a rise of 750,000 nonfarm jobs, but the ADP nonfarm employment change disappointed at 374,000. The weekly initial claims data, later Thursday, will also be watched as a precursor to Friday’s release.
Back in Europe, earnings come from Barratt Developments (LON:BDEV) and Superdry (LON:SDRY), while French media and publishing firm Lagardere (PA:LAGA) will also be in the spotlight after billionaire Bernard Arnault restructured his holdings.
Crude prices weakened Thursday after the Organisation of Petroleum Exporting Countries and their allies, a group known as OPEC+, confirmed its intention at a meeting Wednesday to add another 400,000 barrels per day of supply each month through December. The group also raised its demand forecast for 2022 earlier this week.
Doubts remain about demand growth in the near term, however, given the continued spread of Covid-19 in the U.S. and Europe, and with a number of U.S. refiners, a major source of demand, remaining offline after Hurricane Ida hit the Gulf Coast area earlier in the week.
That said, U.S. crude inventories dropped by a hefty 7.2 million barrels last week as the U.S. gears up for the last peak of its summer driving season this weekend.
By 2:05 AM ET, U.S. crude futures traded 0.4% lower at $68.33 a barrel, while the Brent contract fell 0.3% to $71.38.
Additionally, gold futures rose 0.1% to $1,816.55/oz, while EUR/USD traded 0.1% higher at 1.1845.