European Stock Futures Mixed; Shutdowns and Brexit Talks in Focus

© Reuters © Reuters

By Peter Nurse – European stock markets are seen opening mixed on Monday, as investors digest more coronavirus-inspired lockdowns, prolonged Brexit negotiations as well as strong Chinese growth ahead of key central bank meetings.

At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.3% lower, CAC 40 futures in France dropped 0.5%, while the FTSE 100 futures contract in the U.K. rose 0.2%.

Global stock markets have seen strong gains over the last few weeks, helped by investor optimism that positive vaccine developments could prompt a global recovery in 2021. However, the roll out of these injections will take time and the Covid-19 virus is still severely affecting economies across the continent.

The southern German region of Bavaria announced on Sunday that it will impose a tougher lockdown from Wednesday until early January, meaning people will only be able to leave their homes if they have a good reason.

Germany's problems with the second wave of Covid-19 has undoubtedly contributed towards production expectations deteriorating for the coming months. Germany's Ifo institute said its index for production prospects dropped to 5.5 points in November from 16.3 points in October.

German industrial production rose 3.2% on the month in October, more than expected, but this could be a high point over the near term.

Another factor potentially weighing is the uncertainty surrounding Britain’s trading relationship with the EU in the new year. British Prime Minister Boris Johnson and European Commission President Ursula von der Leyden are due to hold a call on Monday evening with differences over fishing rights, fair competition and ways to solve future disputes still remaining.

Yet it’s not all bad news. Earlier Monday, China saw the biggest surge in November exports since February 2018, pointing to not only the continuing economic recovery by the second largest economy in the world, but also a recovery in global demand.

Additionally, the European Central Bank and the U.S. Federal Reserve are both due to release policy decisions later in the week. The ECB is widely expected to increase its bond-buying program to aid the region’s economic recovery. Expectations of a U.S. stimulus package are also gathering pace after weak payrolls data last week, following months of deadlocked negotiations.

Oil prices weakened Monday on concerns the surge in coronavirus cases, mainly in Europe and the U.S., will result in more lockdowns, hitting demand for the product.

U.S. crude futures traded 0.7% lower at $45.95 a barrel, while the international benchmark Brent contract fell 0.6% to $48.98. Both benchmarks gained for a fifth consecutive week last week.

Elsewhere, gold futures rose 0.2% to $1,843.95/oz, while EUR/USD traded 0.1% higher at 1.2124.

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