European Stock Futures Higher; Chinese Rate Cut Helps Sentiment

By Peter Nurse 

Investing.com - European stock markets are expected to open higher Tuesday, helped by China easing monetary policy while concerns about the economic impact of the Omicron Covid variant ease.

At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 0.7% higher, CAC 40 futures in France climbed 0.9% and the FTSE 100 futures contract in the U.K. rose 0.3%.

This positive tone has been helped by the decision of the People's Bank of China to cut the reserve requirement ratio by 50 basis points, reducing the amount of cash that banks must hold in reserve.

This move, the second this year, is aimed at bolstering growth as the world’s second largest economy has lost momentum in recent months. It will also loosen liquidity conditions as some leading property developers face debt default risks.

Global equities bounced on Monday on receding worries about the impact of the Omicron variant after health officials from both South Africa, where the variant was first discovered, and the U.S. reported over the weekend that Omicron cases had only shown mild symptoms. 

Additionally, a British study showed that people had a better immune response when they mixed the different Covid-19 vaccines, offering some hope to poorer countries which may need to combine different brands if supplies run low.

In corporate news, ABB (SIX:ABBN) will be in the spotlight after the Swiss engineering company unveiled higher sales and profitability targets on Tuesday, expecting to benefit from higher demand from rebounding economies as well as plugging into trends like decarbonisation.

Turning to economic data, the main release will be the German ZEW economic sentiment index for December, which is expected to show falling confidence in the Eurozone’s most important economy after mobility restrictions were reintroduced to combat the latest Covid surge.

Crude prices rose Tuesday, adding to the previous session’s strong gains as worries over the impact of the omicron Covid variant on global demand eased. 

Also, the chance of Iranian exports returning to the global market fell after Germany urged Iran on Monday to present realistic proposals in talks over its nuclear program. This suggests a nuclear deal is still a long way off. 

Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day.

By 2 AM ET, U.S. crude futures traded 1.5% higher at $70.55 a barrel, while the Brent contract rose 1.3% to $74.06. Both benchmarks posted gains of just under 5% on Monday.

Additionally, gold futures rose 0.2% to $1,783.65/oz, while EUR/USD traded 0.1% higher at 1.1293.

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