European stock futures edge lower; central banks in focus

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At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.3% lower, CAC 40 futures in France dropped 0.3% and the FTSE 100 futures contract in the U.K. fell 0.2%.

Data released earlier in the session showed that German factory orders dropped 0.4% in April, an improvement from the dramatic revised 10.9% slump the previous month, but still indicative of the difficulties in the industrial sector in Europe’s largest economy.

The final composite PMI index, seen as a good gauge of overall economic health, released Monday, showed that business activity in the eurozone was shored up last month by the bloc’s dominant services industry offsetting a deepening decline in the manufacturing sector.

Across the pond, U.S. service sector activity barely grew in May, suggesting the recent strong growth in this important sector may now be running out of steam in the face of rising interest rates and high inflation.

Markets are increasingly looking for the Federal Reserve to pause rate hikes next week, but the European Central Bank appears to still be months away from following suit with inflation remaining a major issue.

President Christine Lagarde on Monday cemented expectations of more rate hikes–the ECB also meets next week–by stating that it was too early to call a peak in core inflation despite “signs of moderation”. 

Australia’s central bank raised interest rates by 25 basis points overnight, warning that inflation still remained too high in the country and that more policy tightening may still be in order this year.

Oil prices edged lower Tuesday, handing back some of the previous session’s sharp gains as traders returned their attention to the weakening U.S. economic backdrop after the Saudi production cut.

By 02:00 ET, U.S. crude futures traded 0.7% lower at $71.68 a barrel, while the Brent contract dropped 0.6% to $76.27. 

Saudi Arabia, the world’s top exporter, pledged over the weekend an additional cut of around one million barrels per day from July compared with its production levels in May, in an attempt to boost slumping crude prices.

Additionally, gold futures rose 0.1% to $1,976.20/oz, while EUR/USD traded 0.1% higher at 1.0724.