European shares dip in choppy trade, oil stocks cap declines

European stock markets

European stock markets are expected to open marginally lower Tuesday, with investors monitoring the Ukraine war as well as U.S. monetary policy developments.

At 3 AM ET (0700 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.4% and the FTSE 100 futures contract in the U.K. fell 0.1%.

Russian troops have continued their bombardment of several cities in Ukraine, with the southern port of Mariupol having become a focal point while attacks were also reported to have intensified on the second city of Kharkiv.

Diplomacy efforts have so far failed to bear fruit, while U.S. President Joe Biden issued a strong warning that Russia is considering using chemical weapons, adding that President Vladimir Putin’s “back was against the wall.”

Biden is set to arrive in Brussels on Thursday for summits with members of NATO as well as the European Union governments, to discuss their response to Russia’s aggression.

Elsewhere, investors will also digest Monday’s hawkish comments from Federal Reserve Chairman Jerome Powell in the wake of last week’s interest rate hike of 25 basis points, the likely start of a sustained tightening cycle.

Powell said the central bank must move “expeditiously” to raise rates and possibly “more aggressively” to keep inflation from getting entrenched. Influential investment bank Goldman Sachs now expects the Fed to raise interest rates by 50 basis points at both its May and June meetings.

European Central Bank President Christine Lagarde said on Monday that the world’s two top central banks will move out of sync in the foreseeable future, as the war in Ukraine will have very different effects on their economies.

Investors will keenly watch the comments which come after a rather well-received start to monetary tightening cycle by the Fed as the central bank hiked U.S. interest rates for the first time since 2018 last week.

“For now, central banks remain focussed on bringing down inflation and containing any second-round effects on wages and prices,” said Neil Shearing, group chief economist at Capital Economics, adding that the war in Ukraine had not deterred central bankers from their plans to tighten policy.

The FTSE MIB rose  by 0.74% to 24,478.20. In the cash markets, the DAX  Germany  rose by 0.72%  to 14,432.65. CAC 40  in France rose by 0.30% to 6,616.37 while the FTSE 100  in the U.K. was up  by 0.53% to 7,478.35 ,at the time of writing.

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