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European Stock Futures Higher; U.S. bond Yields in Focus

European stock markets are expected to open higher Wednesday, rebounding to a degree from the previous session’s sharp losses, but investors continue to fret about higher U.S. bond yields.

At 2:01 AM ET (0610 GMT), the DAX futures contract in Germany traded 0.6% higher, CAC 40 futures in France climbed 0.6% and the FTSE 100 futures contract in the U.K. rose 0.1%.

European investors are closely watching movements in U.S. markets, after higher bond yields prompted sharp losses on Wall Street as well as in Europe. The Nasdaq Composite dropped 2.8% on Tuesday, its largest selloff since March, after the benchmark 10-year Treasury yield climbed to a high of 1.57%. That was in response to Federal Reserve Chairman Jerome Powell telling the Senate Banking Committee that inflation could stay "elevated" longer than the central bank had previously predicted. The selloff pushed the DAX and the CAC 40 down by over 2%.

The 10-year Treasury yield dropped back to 1.53% later Wednesday, helping sentiment in Europe.

Also helping the tone Wednesday was the news that China Evergrande Group (HK:3333) had agreed to sell its stake in Shengjing Bank for $1.5 billion, raising hopes the property giant will be

able to make Wednesday’s $47.5 million bond interest payment deadline.

The highly-indebted property developer has been struggling to finance its debt of more than $300 billion, raising fears of a default which could have widespread repercussions.

Back in Europe, a number of the world’s central bankers, including European Central Bank President Christine Lagarde and the Bank of England’s Governor Andrew Bailey, are all scheduled to speak at the ECB Forum on Central Banking on Wednesday.

The data slate centers around the Eurozone economic sentiment data, while corporate earnings releases will come from Next (LON:NXT) and Travis Perkins (LON:TPK).

Crude prices weakened Wednesday following a surprise increase in U.S. crude stockpiles, disrupting a rally based on signs the global market was tightening as demand rebounded from the pandemic.

U.S. crude inventories grew by just over 4 million barrels last week, according to the American Petroleum Institute. That would be the first increase in the country’s stocks in eight weeks if confirmed by the U.S. Energy Information Administration later on Wednesday.

By 2:10 AM ET, U.S. crude futures traded 1.8% lower at $73.93 a barrel, slipping from its highest level since July, while the Brent contract fell 1.8% to $76.98, after previously reaching its highest since October 2018.

Additionally, gold futures rose 0.1% to $1,738.50/oz, while EUR/USD traded flat at 1.1681.

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