European Stock Futures Higher; Fed Tapering Plan Helps

This post was originally published on this site – European stock markets are expected to open higher Thursday, following Wall Street upwards after the Federal Reserve delayed tapering to later in the year while concerns over heavily indebted Chinese property group Evergrande eased.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.6% higher, CAC 40 futures in France climbed 0.8% and the FTSE 100 futures contract in the U.K. rose 0.8%.

The major European indices are expected to follow Wednesday’s positive lead from Wall Street, as all the major U.S. equity averages all closed firmly higher. The Dow Jones Industrial Average, for example, climbed well over 300 points, or 1%. 

These gains followed the U.S. central bank indicating at the conclusion of its latest policy-setting meeting that it will likely begin reducing its monthly bond purchases towards the end of this year. That was a positive surprise for the minority who had expected an immediate start to the withdrawal of the stimulus that has been supporting the economy during the pandemic.

That said, the Fed turned more hawkish in terms of interest rates, with nine of 18 Fed officials – up from seven at the June meeting – ready to raise interest rates next year in response to higher levels of inflation. Inflation has run ahead of expectations this year, but the Fed still expects it to revert to more normal levels later.

Also helping the tone were solid gains in Chinese markets Thursday,  after the People’s Bank of China injected more money into the banking system, easing concerns about the fallout from China Evergrande’s debt crisis. The stricken real estate developer said Wednesday it had reached an agreement to settle interest payments on a domestic bond, but it remains unclear whether the company will be able to pay $83.5 million in  interest on its dollar bonds which is due later Thursday.

Back in Europe, the Bank of England announces its latest monetary policy decision later in the session, but the central bank is not expected to change its record-low interest rates or the extent of its asset purchases. The central banks of Norway and Turkey may, however, raise their interest rates. 

The European data slate centers around the release of the flash Eurozone composite PMI data for an indication of the region’s economic well being. 

In corporate news, Enel (MI:ENEI), Europe’s largest utility, is planning on setting up a new company, called Gridspertise, dedicated to digital grid services, according to newspaper Il Sole 24 Ore.

Crude prices edged higher Thursday, helped by another decline in U.S. oil stocks as production in the important Gulf of Mexico region remained hampered by the damage caused by two recent hurricanes.

Data released by the U.S. Energy Information Administration on Wednesday showed crude inventories fell by almost 3.5 million barrels last week, the seven straight weekly decrease, and followed on from the 6.4-million-barrel draw recorded the previous week.

Crude oil supply data from the industry body, the American Petroleum Institute, released a day before, showed a draw of just over 6 million barrels.

By 2:05 AM ET, U.S. crude futures traded 0.2% higher at $72.38 a barrel, while the Brent contract rose 0.2% to $76.37. 

Additionally, gold futures fell 0.9% to $1,763.20/oz, while EUR/USD traded 0.2% higher at 1.1711.

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