Investing.com - European stock markets are expected to open lower Wednesday, with China’s deteriorating economic outlook and fears of a hawkish Federal Reserve weighing on sentiment.
At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.6% lower, CAC 40 futures in France dropped 0.6% and the FTSE 100 futures contract in the U.K. fell 0.4%.
Asian stock markets have largely headed lower Wednesday, and this weakness is likely to be duplicated in Europe as investors fret about fresh signs of economic decline in the world's second-largest economy, a major regional growth driver and substantial market for many of Europe’s largest companies.
China’s economic worries pile up
Data released overnight showed that China's new home prices fell in June for the first time this year, providing more evidence of the pressures facing the country’s important property sector.
This followed Chinese retail sales and industrial production growing much less than expected in July, while data released last week showed that the world’s second-largest economy sank into disinflation during July.
At the same time, U.S. retail sales soared in July, pointing to more potential upside pressure for inflation, presenting a hawkish outlook for interest rates in the world’s largest economy, especially after Friday’s stronger-than-expected producer prices.
U.K. inflation remains high despite fall
Back in Europe, U.K.’s annual headline inflation eased to 6.8% in July from 7.9% the prior month.
While this is undoubtedly welcome news as far as the Bank of England is concerned, this still leaves inflation more than three times higher than its 2% medium-term target.
Additionally, data released Tuesday showed that basic wages in Britain rose 7.8% in June, a new record growth rate, adding to long-term inflation pressures even after 14 back-to-back increases in interest rates.
There are also important data due in the eurozone, with preliminary second-quarter gross domestic product figures expected to show flimsy growth of 0.2% and industrial production data likely to be negative.
Banking sector in focus
Earnings are expected for the likes of Danish brewing giant Carlsberg (CSE:CARLa) and U.K. insurer Aviva (LON:AV), while the banking sector is likely to be in the spotlight after weakness on Wall Street as credit rating agency Fitch warned it may have to downgrade credit ratings of dozens of banks, including JPMorgan Chase (NYSE:JPM).
Crude falls despite hefty U.S. inventories draw
Oil prices fell Wednesday, extending the previous session’s losses as concerns over China’s weakening economy outweighed a bigger-than-expected draw in U.S. inventories.
Data from the American Petroleum Institute showed that U.S. oil stockpiles saw a much bigger-than-expected 6.2 million barrel draw last week, and official inventory data, from the Energy Information Administration, is due later on Wednesday, for confirmation.
By 02:00 ET, the U.S. crude futures traded 0.4% lower at $80.64 a barrel, while the Brent contract dropped 0.4% to $84.53. Both benchmarks had weakened to their lowest since Aug. 8 on Tuesday.
Additionally, gold futures rose 0.1% to $1,936.25/oz, while EUR/USD traded 0.1% higher at 1.0911.