Wednesday, October 5, 2016

European Stocks Seen Lower As Markets Mull Fed Comments

By Holly Ellyatt
October 5, 2016

European stocks are expected to open lower on Wednesday as markets digest hawkish comments from U.S. Federal Reserve officials.

The London FTSE index is expected to open 9 points lower at 7,065, the German DAX 49 points lower at 10,570 and the French CAC 31 points lower at 4,472, according to IG.

European stocks look set to start the trading day in lackluster fashion, similarly to Asia, where stocks traded mixed on Wednesday as investors reacted to the latest remarks from Fed officials indicating a forthcoming hike in interest rates.

On Tuesday, Richmond Fed President Jeffrey Lacker said there was a strong case for raising interest rates, while on Wednesday, in a speech in New Zealand, Chicago Fed President Charles Evans said he would be "fine" with hiking rates by year-end if the data remained supportive, Reuters reported.

Meanwhile in Europe, a Bloomberg report on Tuesday said the European Central Bank (ECB) might taper bond purchases before the expected March end of its quantitative easing program. The ECB later denied it had discussed the subject, Reuters reported.

Elsewhere, concerns over Brexit continue to weigh on sterling, with the currency hitting a 31-year low against the dollar on Tuesday. U.K. Prime Minister Theresa May said she was not worried about the pound's decline, however, telling the BBC on Tuesday that "currencies of course go up and down."

In the commodity markets, gold prices edged higher early on Wednesday, after falling 3.3 percent in the prior session to their lowest in more than three months, as the dollar eased back and equities fell, Reuters reported.

Oil prices also rose in early trading on Wednesday after a report that U.S. fuel inventories may have fallen for a fifth straight week.

On the earnings and data front, Tesco releases interim results and final September services and manufacturing purchasing manager's index (PMI) data from the euro zone is released.

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