European stock markets are expected to open marginally higher Tuesday, as investors continue to digest the inconclusive result of the weekend’s German election as well as Chinese property group Evergrande’s ongoing debt crisis.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.4% and the FTSE 100 futures contract in the U.K. rose 0.2%.
Investors will be keeping an eye on the ramifications of Germany’s general election on Sunday, which resulted in the Social Democrats party narrowly winning the vote.
Prolonged negotiations are likely to follow in order to form a coalition to govern Europe's biggest economy, but the far left's weak result has in all likelihood ruled it out as a potential partner, to the market’s relief.
Investors also continue to fret about the future of China Evergrande Group (HK:3333), and the potential for global contagion, after it failed on Friday to meet a deadline to make an interest payment to offshore bond holders. The world’s most indebted property developer now has 30 days to make the payment before it falls into default. The Chinese central bank injected another 100 billion yuan into the money market on Tuesday to keep conditions stable.
Influential investment bank Goldman Sachs (NYSE:GS) cut its forecast for China’s 2021 economic growth to 7.8% from 8.2% and for 2022 to 5.5% in a note earlier Tuesday, citing issues at energy-intensive industries as well as concerns over managing stresses in the real estate market.
Back in Europe, the European Central Bank will hold its annual research meeting, with ECB President Christine Lagarde’s speech sure to be watched for any sign that surging energy prices are changing the bank's thinking about inflation. European gas and power prices surged to new
record highs in early trade on Tuesday.
Ahead of that, the widely-watched German GfK consumer sentiment data showed a surprise rise in confidence in October, to +0.3 from a revised -1.1 the previous month.
Crude prices traded higher Tuesday, rising for the sixth consecutive session on concerns of a global supply crunch just as demand picks up with the easing of Covid-19 pandemic restrictions.
Global supplies remain tight after Hurricane Ida disrupted production in the U.S. Gulf of Mexico region in late August while members of the Organisation of Petroleum Exporting Countries and their allies only gradually increase output.
Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day, as well as OPEC’s latest World Oil Outlook.
By 2:05 AM ET, U.S. crude futures traded 1.2% higher at $76.38 a barrel, hitting its highest since July, after jumping 2% the previous day. The Brent contract rose 1.1% to $79.62, reaching its highest since October 2018, after climbing 1.8% on Monday.
Additionally, gold futures fell 0.2% to $1,747.90/oz, while EUR/USD edged higher to 1.1698.