European stock markets are seen opening marginally lower Monday, with investors keeping a wary eye on the oil market following signs that China’s economic recovery may be slowing.
At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France dropped 0.1% and the FTSE 100 futures contract in the U.K. fell 0.1%.
Earlier Monday, a private survey showed China’s services sector grew in June at its slowest pace in 14 months, with the Caixin services purchasing managers index coming in at 50.3, the lowest since April 2020.
This, following on from Thursday’s manufacturing equivalent figure also falling in June, suggested that the recovery in the world’s second-largest economy from the Covid-19 pandemic is starting to abate.
Elsewhere, the market will be waiting for news from Vienna with a group of major oil producers set to reconvene talks aimed at finalizing output levels for the rest of the year and beyond.
The Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, had appeared on Friday to have decided to increase production by about 2 million barrels a day from August to December 2021, as well as extend the remaining output cuts to the end of 2022.
However, this show of unity was dashed by the United Arab Emirates’s last-minute refusal to agree to the deal, prompting Monday’s fresh negotiations.
At 2 AM ET, U.S. crude futures traded 0.1% higher at $75.22 a barrel, while the Brent contract rose 0.1% to $76.23, after posting last week its first down week in six.
Adding to the reasons to be cautious, French Health Minister Olivier Veran warned over the weekend that a wave of Covid infections may hit his country by the end of July because of the delta variant. Across the Channel, however, signs increased that the government is set to lift remaining Covid-19 restrictions on July 19, as planned.
Any losses are likely to be limited with U.S. markets closed for the extended July 4 weekend. Additionally, Friday’s nonfarm payrolls release was received positively as it indicated the American economic recovery remained intact but wouldn’t yet prompt the Federal Reserve to withdraw its stimulus.
However, some think that picture might change over the next couple of months, as the ending of enhanced unemployment benefits squeezes people back into the labor force.
"For the third month in a row, the June nonfarm payroll report understated the strength in the labor market, which we think we will see emerge in July," said Phil Orlando,. chief equity strategist at asset manager Federated Hermes (NYSE:FHI), in a note to clients. Orlando expects payrolls growth to accelerate to 1.5 million this month, with another "blowout" month in August following.
Nearer term, investors will also be monitoring the release of final purchasing managers’ index readings out of the Eurozone for an indication as to the health of the economic recovery across the continent.
Europe’s tech sector is likely to be in focus Monday following the news that Chinese regulators ordered app stores to stop offering Didi Global's (NYSE:DIDI) services, just days after its listing in
New York, accusing the ride-hailing giant of illegally collecting users’ data. Softbank (OTC:SFTBY), a major backer of Didi, fell 5% in Tokyo overnight.
Additionally, gold futures rose 0.1% to $1,785.55/oz, while EUR/USD traded 0.1% lower at 1.1854.