European Stocks Fragile, Here Is What You Need to Know

The sentiment is fragile. Investors worry about the effects of tighter monetary policy. European stock markets should generally begin a little down on Thursday, recovering following losses earlier in the week.

The DAX futures contract in Germany traded 0.4% lower at 02:00 ET (06:00 GMT). Moreover, the CAC 40 futures contract in France fell 0.2%. The FTSE 100 futures contract in the United Kingdom was mostly flat. Although a significant near-term rebound is improbable, European equities will profit from minor increases on Wall Street late Wednesday and in Asia overnight. For the first time since the pandemic lockdown two years ago, consumer confidence in the United Kingdom fell into the negative range.

Will The Living Standards Take A Turn For The Worse?

Consumers’ concerns about a tighter strain on living standards caused market research firm YouGov to announce a decrease of 4.2 points to 98.8 in August. European policymakers must balance rising inflation against the dangers of abrupt slowdowns in their economies. The ECB hiked interest rates by 75 bps and promised more moves in the upcoming months. Hence, the fight against inflation is top of mind for them.

In light of this, Barclays predicts that Europe will experience a recession in Q1 of 2023. The U.K. bank estimates that the Eurozone GDP would drop by more than 1% over the year. Later in the session, French inflation data is scheduled to be released. The annual rate should decrease to 5.8% in August from 6.1% in July. Meanwhile, the month-to-month rate increased to 0.4% from 0.3%. Hot inflation data from the US earlier in the week, which had a significant impact on global markets, confirmed another significant rate rise by the Fed next week.