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European Stock Futures Lower as U.S. Inflation Fears Weigh

European stock markets are seen opening lower Wednesday, as a jump in U.S. inflation raised concerns the Federal Reserve could tighten its ultra-easy monetary policies sooner than previously expected.


At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.3% and the FTSE 100 futures contract in the U.K. fell 0.1%.


European markets have received a weak handover from Asia, and also Wall Street, after data released Tuesday showed the U.S. consumer price index jumped 0.9% in June, climbing 5.4% on the year, the biggest jump in U.S. inflation in 13 years.


“Yet another blowout inflation reading makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely ‘transitory’,” said analysts at ING, in a note. “The case for a 2022 rate hike is strong.”


With this in mind, investors will carefully study comments from Fed Chairman Jerome Powell in his two-day semi-annual testimony to Congress, starting later Wednesday, for any sign that the latest numbers have changed his thinking.


Back in Europe, the U.K. inflation also surprised to the upside, with prices climbing 0.5% in June, a gain of 2.5% on the year. The release of Eurozone industrial production figures for May is due later in the session.


The second-quarter earnings season continues in the U.S. Wednesday following the strong numbers by the likes of Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM) on Tuesday. More banks are due to report, with Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) all due to update before the market opens.


Elsewhere, oil prices edged lower Wednesday after China’s crude imports fell 3% in the first half of the year, raising concerns about slowing demand at the world’s top importer.


That said, the market remains at elevated levels after closing at the highest level since October 2018 as a further drop in U.S. crude stocks indicated demand in the world’s largest consumer is still strong.


The American Petroleum Institute reported that crude inventories slid by more than 4 million barrels last week, which would be an eighth straight weekly draw, the longest run of declines since January 2018, if confirmed by government figures later on Wednesday.


At 2 AM ET, U.S. crude futures traded 0.3% lower at $75.05 a barrel, after climbing 1.6% Tuesday, while the Brent contract fell 0.2% to $76.36, after gaining 1.8% in the previous session.


Additionally, gold futures rose 0.2% to $1,814.20/oz, while EUR/USD traded 0.1% higher at 1.1790.

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