European stock markets are expected to open lower Monday, weighed by sharp losses in Asia amid concerns about the health of property giant China Evergrande Group (HK:3333) and ahead of the week’s crucial Federal Reserve meeting.
At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.9% lower, CAC 40 futures in France dropped 2.1% and the FTSE 100 futures contract in the U.K. fell 0.8%.
European equities have received a negative handover from Asia, despite China, Japan and South Korea being on holiday, with Hong Kong’s Hang Seng index dropping more than 3%, dragged down by the continued dumping of shares in Chinese property company Evergrande.
Investors seem to be taking a dim view of its business prospects, with a bond interest payment due on Thursday and concerns growing that a default on its $300 billion of liabilities could crystallize broader risks in China's financial system.
The week also sees a number of central banks hold policy-setting meetings, including the Bank of England, the Bank of Japan and the Swiss National Bank. But the focus will be on the Federal Reserve, with the U.S. central bank potentially taking another step toward tapering at its two-day meeting, starting on Tuesday.
Investors will be looking to see if the Fed judges the U.S. economy to be sufficiently strong for it to start reducing the massive amount of monetary support it has provided during the pandemic, though the consensus is for an actual announcement to be delayed until the November or December meetings.
Back in Europe, Lufthansa (DE:LHAG) will be in the spotlight after the German airline said on Sunday it would launch a capital increase that was expected to raise 2.14 billion euros ($2.51 billion) to pay back part of a state bailout it received during the coronavirus crisis.
Crude prices fell as supply increased in the U.S., the largest consumer in the world. The country’s oil and gas rig count rose by nine to 512 in the week to Sept. 17, its highest since April 2020 and double the level from this time last year, Baker Hughes said on Friday.
Additionally, only 23% of U.S. Gulf of Mexico crude output remained offline as of Friday, an improvement from the 28% seen on Thursday, more than two weeks after Hurricane Ida hit.
The dollar also climbed to a three-week high ahead of the Fed meeting, making commodities priced in the currency more expensive.
By 2 AM ET, U.S. crude futures traded 0.6% lower at $71.36 a barrel, while the Brent contract fell 0.5% to $74.98.
Additionally, gold futures fell 0.1% to $1,750.35/oz, while EUR/USD traded 0.1% lower at 1.1717.