Stocks – Europe to Weaken as Divisions Remain Over Crisis Funding

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Investing.com – European stock markets are set to largely open lower Wednesday, consolidating after posting gains this week, amid disagreements over how to finance the region’s response to the coronavirus crisis.

At 2:15 AM ET (0615 GMT),  {{167|France’s CAC 40 futures and the FTSE 100 futures contract in the U.K. both fell 2.0%, while the DAX futures contract in Germany outperformed, rising 0.1% higher.

“There is reason to be cautious as this looked to be a relief rally ahead of next week’s start of Q1 earning season and before data reveals the depth of the virus impact,” said analysts at JPMorgan (NYSE:JPM), in a research note.

“Data shows the recent move higher has been accompanied by short covering and de-risking rather than active risk taking on the long side.”

A teleconference between Eurozone finance ministers, starting Tuesday, was set to continue through to Wednesday morning amid differences over how to tackle the economic fallout of the crisis. A press conference was tentatively scheduled for 4 AM ET (0800 GMT).

Some of the EU countries hardest hit by the virus – Italy, Spain and France, for example – want to share out the debt incurred in combating the coronavirus in the form of “coronabonds” – mutualized debt that all EU nations help pay off. But this has run into opposition from some of the wealthier countries, who feel they will be stuck paying off other countries’ debt.

Italy remains the epicenter of the crisis in Europe, with the highest death toll – more than 17,000; next comes Spain, with over 14,000 deaths, according to data from Johns Hopkins University.

In corporate news, Givaudan (SIX:GIVN) will be of interest after the Swiss perfume company said Wednesday that sales rose in the first quarter, recording solid growth across all its regions.

Thales became the latest major European company to slash its dividend, suspend profit guidance and top up liquidity in response to the coronavirus crisis. The French aerospace and defence supplier said it had withdrawn the proposed final instalment of its 2019 dividend, saving 430 million euros ($465 million).  U.k. insurer Aviva (LON:AV) did likewise.

There’s little in terms of European data due Wednesday, but of interest will be minutes of the meetings at which the Federal Reserve slashed interest rates back to zero, broadened access to dollars for foreign central banks, and restarted the massive asset purchases. The minutes are due for release at 14:00 ET (1800 GMT).

Oil prices have been volatile of late, and pushed higher during European hours after dropping sharply overnight as traders were kept in limbo on the possibility of production cuts.

Ahead of the meeting, the EIA will issue its weekly U.S. oil inventory numbers at 10:30 AM ET (14:30 GMT), with analysts looking for a rise of about 9.3 million barrels for the week ended April 3.

In its measure of weekly crude stockpiles, the American Petroleum Institute Tuesday reported a rise of 11.9 million barrels.

At 2:15 AM ET, U.S. crude futures traded 4.6% higher at $24.70 a barrel. The international benchmark Brent contract rose 1.6% to $32.39.

Elsewhere, gold futures fell 0.1% to $1,683.10/oz, while EUR/USD traded at 1.0846, down 0.4% on the day.

 

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