European Stock Futures Edge Higher as German Ifo Index Approaches

By Peter Nurse

European stock markets are projected to open slightly higher on Monday following recent declines, with attention shifting to the German Ifo business climate index as a key indicator of the Eurozone’s economic health.

As of 02:00 ET (07:00 GMT), German stock futures were up 0.1%, while French and U.K. contracts saw similar gains of 0.1%.

European equities faced significant losses last week, particularly in Germany, which fell nearly 3%. This drop occurred after the central bank reduced the pace of its interest rate hikes but emphasized that substantial tightening remains necessary to address ongoing inflation concerns.

ECB governing council member Klaas Knot commented on Friday that the central bank still has more ground to cover in terms of interest rate increases compared to its U.S. counterpart, although it is unlikely to reach the same peak rates.

Investor sentiment has been impacted by the prospect of further interest rate hikes alongside expectations of weak economic growth. However, there is hope for some improvement in economic indicators for December.

Recent data indicated that the decline in German economic activity has slowed for a second consecutive month, suggesting that the anticipated recession may be less severe than initially feared.

Additionally, investors will be attentive to remarks from ECB Vice-President Luis de Guindos in Madrid later today for further insights into the central bank’s strategy.

In corporate developments, Germany is set to assume the risks associated with €216 billion in derivatives accumulated by energy company Uniper, signaling a move to nationalize the firm amid the region’s energy challenges.

Crude oil prices increased on Monday, buoyed by the Biden administration’s announcement to start replenishing strategic reserves and optimism about demand growth from China in the forthcoming year.

The U.S. government stated on Friday that it would initially purchase 3 million barrels of oil for its reserves, having depleting the Strategic Petroleum Reserve to its lowest levels in almost 40 years to manage rising fuel costs this year.

Furthermore, China has lifted its strict COVID-zero policy. Despite a surge in cases during its reopening, there is growing optimism that economic activity will pick up in 2023.

By 02:00 ET, oil futures increased by 0.4% to $74.75 a barrel, while Brent contracts rose 0.3% to $79.30. Both were trading near one-year lows due to concerns over a potential recession next year.

Additionally, gold prices climbed by 0.1% to $1,800.85 per ounce, and the euro traded 0.5% higher at 1.0631.