European stock markets are expected to open cautiously Thursday, as the conflict in Ukraine continued and investors digest the potential economic ramifications of surging commodity prices.
At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 0.3% higher, CAC 40 futures in France climbed 0.1%, while the FTSE 100 futures contract in the U.K. fell 0.2%.
European equity markets recovered to a degree on Wednesday and saw some small gains during this session, but they have been hit hard over the last week that has followed Russia’s invasion of Ukraine.
The conflict has intensified in the last three days, with Kharkiv, Ukraine’s second-largest city, suffering heavy artillery and rocket bombardment, while a miles-long military convoy of troops nears Kyiv, the capital. Russian forces have also captured the Black Sea port of Kherson.
The conflict in Ukraine could reduce the level of global gross domestic product by about 1 percentage point by 2023 and add 3% to global inflation this year, the U.K.’s National Institute for Economic and Social Research estimated Wednesday, with Europe more exposed than any other region.
European Central Bank Governing Council member Mario Centeno also voiced his concerns, warning that the conflict could lead to a period of stagflation – low growth combined with high inflation – in Europe.
In the U.S., Federal Reserve Chairman Jerome Powell said in testimony to Congress that it was still “appropriate to raise interest rates by 25 basis points in March”, but also eased investor fears about more aggressive Fed monetary policy tightening ahead.
Back in Europe, earnings season remained in full flow.
Thales (PA:TCFP) posted a 32% rise in operating income and record cashflow, as Europe’s largest defence electronics company swung back into the black in its aerospace business.
Lufthansa (DE:LHAG) said it narrowed its losses in 2021, but the German airline said it could not provide a detailed outlook for 2022 due to the war in Ukraine and the pandemic.
Merck KGaA (DE:MRCG) forecast strong earnings growth this year, driven by its Life Science unit, which supplies materials and gear to Covid-19 vaccine makers and to the pharmaceuticals industry.
Oil prices soared to new multi-year highs, as a group of top producers did little to alleviate the supply concerns caused by the Russian sanctions at Wednesday’s meeting.
The Organization of the Petroleum Exporting Countries and their allies including Russia, known as OPEC+, decided to maintain an increase in output by 400,000 barrels per day in March, largely ignoring the Ukraine crisis and the associated surge in prices during their talks.
So far, the West has stopped short of targeting Russia’s oil and gas exports directly, but the U.S. announced on Wednesday sanctions on Moscow’s oil refining sector, further raising fears of supply disruptions, and international buyers remain wary of contracting for Russian oil. Surgutneftegaz, one of Russia’s biggest producers, failed to attract a single buyer for its April exports at a tender on Wednesday.
The FTSE MIB rose by 0.40% to 24,368.20. In the cash markets, the DAX Germany was trading down by 0.50% to 13,924.65. CAC 40 in France fell by 0.14% to 6,496.37 while the FTSE 100 in the U.K. was down by 0.19% to 7,414.35 ,at the time of writing.