European stock markets were expected to open lower as investors assessed the impact of surging oil prices and disappointing manufacturing activity data from Asia. This came ahead of the release of equivalent manufacturing numbers from Europe. The European equities market posted healthy gains in the first quarter, with the DAX over 12% and the CAC 40 over 13%. However, the rewards could leave the indices more vulnerable to an economic downturn.
Despite these challenges, European equities have shown resilience over the past year, with many investors looking to the region for attractive valuations and potential growth opportunities.
However, the latest data on manufacturing activity from Asia and the surge in oil prices are likely to test the market’s resilience and could lead to increased volatility in the near term.
Investors will be closely watching the release of the manufacturing PMI data from the euro zone later in the session to gauge the health of the region’s economy. The data is particularly important for Germany, which has been the engine of growth for the European economy.
If the manufacturing activity in Germany remains in contraction territory, it could lead to a broader sell-off in European equities and increase the chances of a further economic slowdown.
On the other hand, if the data shows signs of improvement, it could help to boost investor sentiment and provide a much-needed boost to the markets.
European Stocks Expected to Open Lower as Oil Prices Surge on OPEC
Meanwhile, the surge in oil prices could have significant implications for the global economy, particularly for central banks that are already grappling with elevated inflation levels.
The move by OPEC+ to cut production by over 1 million barrels per day through to the end of 2023 is likely to lead to a further rise in oil prices in the near term, which could fuel inflation and force central banks to keep interest rates at a higher level for longer.
This, in turn, could crimp economic growth, particularly in Europe, where core inflation has already reached an all-time high of 5.7% in March.
The European Central Bank has already hiked rates by 50 basis points last month, and policymakers have suggested that further rate increases may be necessary to keep inflation under control.
Finally, in the corporate sector, UBS is set to reduce its workforce by 20-30% as it integrates its former rival Credit Suisse. The move is part of a broader effort by the Swiss authorities to promote global financial stability and reduce the risks posed by the country’s banking sector.
Meanwhile, gold futures have fallen 0.8% to $1,970.00/oz, while EUR/USD has traded 0.4% lower at 1.0795. These movements reflect the increased volatility in the markets and the heightened uncertainty among investors.
Soaring Oil Prices Raise Concerns for Central Banks and Economic Growth in Europe
The European markets are expected to open lower on Monday as investors digest disappointing manufacturing activity data from Asia and the surge in oil prices following OPEC+’s announcement to cut production.
Investors will be closely watching the release of the manufacturing PMI data from the euro zone later in the session to gauge the health of the region’s economy. The surge in oil prices is likely to fuel inflation and force central banks to keep interest rates at a higher level for longer, potentially crimping economic growth.
Despite these challenges, European equities have shown resilience over the past year, and many investors are looking to the region for attractive valuations and potential growth opportunities. However, the latest data and developments in the markets are likely to test the market’s resilience and could lead to increased volatility in the near term.
