European stock markets are expected to open in a mixed fashion on Tuesday, as investors turn their attention to the Federal Reserve policy meeting, Eurozone inflation data, and the release of results from banking giant HSBC.
At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.2%, while the FTSE 100 futures contract in the U.K. rose 0.1%.
Investors are likely to trade cautiously as Fed policymakers begin their policy meeting on Tuesday, with an announcement on interest rates and a subsequent press conference expected on Wednesday. The U.S. central bank is widely expected to announce an increase in rates of a final quarter point and then signal a pause as it assesses its year-long tightening campaign.
However, inflation remains an issue in America and around the world. Earlier on Tuesday, the Reserve Bank of Australia surprised markets with a quarter-point rate hike, as it seeks to combat rising inflation.
Back in Europe, preliminary inflation data for the Eurozone in April is due later in the session and is likely to remain elevated, providing the European Central Bank with more reason to hike interest rates again on Thursday. The Eurozone CPI is forecast to rise 0.9% on the month in April, an annual gain of 7.0%, while the core figure, which excludes volatile food and energy prices, is seen up 1.1% on the month and 5.7% annually.
Manufacturing activity data for the region is also due for release on Tuesday. The German retail sales slumped 2.4% in March, a deterioration from the prior month’s 1.3% fall, representing a hefty annual fall of 8.6%. Consumers are struggling with inflation, which has been cutting into their discretionary spending power.
A lot of the corporate focus on Tuesday will be on HSBC, Europe’s largest bank by asset size. The lender reported a tripling of quarterly profit, as rising interest rates worldwide boosted its income and helped it pay a first quarterly dividend since 2019.
Quarterly results are also scheduled from energy giant BP, with positive numbers likely to result in the FTSE 100 outperforming given the weighting these two stocks have in the U.K.’s benchmark index.
Oil prices steadied on Tuesday after the previous session’s losses, as traders await another Federal Reserve interest rate hike as well as an expected drop in U.S. crude stockpiles. Data from the industry body American Petroleum Institute, due later in the session, are expected to show another fall in U.S. crude inventories, dropping for a third consecutive week and providing some support to the market. By 02:00 ET, U.S. crude futures traded 0.2% lower at $75.52 a barrel, while the Brent contract dropped 0.2% to $79.14.
Both benchmarks dropped more than 1% on Monday after official data showed that China's manufacturing activity unexpectedly fell in April, creating doubt about the strength of the economic recovery at the largest crude importer in the world.
In currency markets, the euro traded higher against the U.S. dollar, with EUR/USD up 0.1% at 1.0984. Meanwhile, gold futures fell 0.1% to $1,991.05/oz.
As investors await further economic data and policy decisions, markets are expected to remain cautious and volatile.
