Title: European Stock Futures Edge Lower; U.S. Inflation Weighs on Sentiment

Jul 14, 2022 01:58AM ET

By: AnalysisWatch

European stock markets are expected to open slightly lower on Thursday, extending losses from the previous session, as investors take into account the latest US inflation report, which was stronger than expected.

As of 2:00 p.m. EDT, the DAX futures contract in Germany was trading 0.2% lower; the CAC 40 futures contract in France was down 0.4%; and the FTSE 100 futures contract in the U.K. was down 0.3%.

Major European indexes closed lower on Wednesday after U.S. consumer inflation jumped to a new four-year high of 9.1% in June, exceeding analysts' forecasts for an 8.8% rise and putting further pressure on the Federal Reserve to raise interest rates once more.

The U.S. central bank raised its key interest rates by 75 basis points in June, their biggest increase since 1994, and that benchmark could prompt it to raise them by a similarly large amount later this month, even if it risks causing a recession in the U.S. economy, which is the main engine of global growth.

It also poses a dilemma for the European Central Bank as the euro falls close to parity against the dollar amid tightening US monetary policy.

A weak currency risks driving up already record-high inflation, or the ECB could respond with its own version of a rapid rise in interest rates, increasing the pressure on an economy already hard hit by high energy costs.

The European Commission will announce its new economic forecasts later in the session, but according to a draft forecast seen by Bloomberg, it will drastically cut its GDP forecast for 2022 and 2023 because of the war in Ukraine, soaring prices, and the threat of energy shortages in winter.