European stock markets are poised to open with marginal losses on Wednesday, with investors closely watching the release of crucial U.S. inflation data.
At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dipped 0.9%, and the FTSE 100 futures contract in the U.K. fell by 0.1%.
Fed Officials Signal Potential End to Rate Hikes
Global equity markets regained some confidence this week following unsettling events in the Middle East over the weekend. This recovery was further buoyed by dovish comments from select Federal Reserve officials, igniting hopes that the world’s most influential central bank may be approaching the conclusion of its interest rate tightening cycle.
“I actually don’t think we need to increase rates anymore,” said Atlanta Fed President Raphael Bostic during a conference in Nashville, Tennessee, on Tuesday.
This sentiment echoes statements from several other Fed officials, indicating that recent increases in longer-term yields might be doing the central bank’s job of tightening financial conditions to combat inflation, potentially leading to fewer interest rate hikes.
Upcoming Inflation Data Curbs Volatility
Despite this optimism, the market is expected to exhibit restrained movements in anticipation of the latest U.S. inflation figures. The release is set to commence later on Wednesday with the publication of the September Producer Price Index (PPI) report, followed by the Consumer Price Index (CPI) data on Thursday.
Any indications of moderating U.S. inflation are likely to reinforce the recent more dovish stance adopted by Fed members concerning future policy, thereby establishing the market’s trajectory for the remainder of the year.
Currently, futures traders are assigning a nearly 90% probability to the Fed maintaining interest rates when it convenes again in November.
Meanwhile, in Europe, there is inflation data to digest, as German consumer prices saw a 0.3% month-on-month increase in September, resulting in an annual rise of 4.5%. While this represents a significant decrease from the prior month’s 6.1% annual figure, it remains well above the European Central Bank’s 2% medium-term inflation target.
Nonetheless, ECB policymaker Francois Villeroy de Galhau expressed confidence on Tuesday that inflation should still reach the target by 2025, even as violence in Israel exerts downward pressure on commodity prices.
Crude Oil Prices Edge Higher Amid Supply Concerns
Oil prices inched higher on Wednesday as traders continued to grapple with the potential for supply disruptions stemming from the turmoil in the Middle East.
Market sentiment has notably calmed following a more than 4% rise in both crude benchmark contracts on Monday. However, concerns persist over the possibility of political and economic contagion arising from the hostilities sparked by Saturday’s attacks by the Palestinian militant group, Hamas, on Israelis in Gaza.
Market participants will also be keeping a close eye on the U.S. weekly oil inventory data from the American Petroleum Institute, which is due a day later than usual due to Monday’s Columbus Day holiday.
As of 02:00 ET, U.S. crude futures traded 0.2% higher at $86.10 per barrel, while the Brent contract advanced by 0.1% to $87.77.
Additionally, gold futures dipped by 0.1% to $1,872.65 per ounce, while the EUR/USD pair traded slightly lower at 1.0601.
