European stock markets are seen opening marginally higher Wednesday, after the previous session’s sharp selloff, but investors remain cautious about the strength of the global recovery, the threat of the delta Covid variant and the potential for central bank tightening.
Stock markets around the globe have been on a tear for much of the year, helped by successful
vaccination programs and vast amounts of monetary and fiscal stimulus.
However, this enthusiasm is showing signs of waning. All three major European indices dropped by around 1% on Tuesday, not helped by German ZEW economic sentiment falling by much more than expected. Also, the broad-based S&P 500 index broke a seven-day winning streak on Wall Street after the ISM non-manufacturing PMI, a key gauge of service-sector activity, fell more than expected, raising worries that the U.S. economy may be approaching a peak.
Also causing concern is the ongoing spread of the delta variant of the Covid-19 virus. A study published over the weekend in Israel, one of the most vaccinated countries in the world, showed a decrease in the effectiveness of the Pfizer/BioNTech vaccine in preventing infections and symptomatic illness, suggesting it is less effective against the latest dominant strain of the virus.
Elsewhere, oil prices stabilized Wednesday after the previous session’s wild ride during which traders digested the failure of the Organization of the Petroleum Exporting Countries and allies to agree a deal to boost production.
This outcome initially resulted in sharp gains, with the Nymex contract climbing to its highest in nearly seven years. However, this enthusiasm quickly turned to concern that the spat between Saudi Arabia and the United Arab Emirates over future output levels could lead to a fresh fight for market share, in an echo of last year's price war.
At 2:05 AM ET, U.S. crude futures traded 0.4% higher at $73.67 a barrel, after settling 2.4% lower Tuesday, its sharpest loss in three weeks, while the Brent contract rose 0.3% to $74.75, after dropping 3.4% during the previous session.