European stocks drop, German Ifo survey due

The DAX index in Germany dropped 0.2%, the CAC 40 in France slipped 0.1% and the FTSE 100 in the U.K. fell 0.1%

European stocks slipped lower Wednesday, tracking overnight losses on Wall Street amid growing uncertainty over valuation levels as well as the future path of U.S. interest rates.

At 07:05 GMT, the DAX index in Germany dropped 0.2%, the CAC 40 in France slipped 0.1% and the FTSE 100 in the U.K. fell 0.1%.

Sentiment received a hit overnight with losses on Wall Street after U.S. Federal Reserve Chair Jerome Powell flagged increasing economic risks and uncertainty over interest rates.

Powell said, in a speech at Greater Providence Chamber of Commerce on Tuesday, said the central bank is in a “challenging situation” with an ongoing risk of faster-than-expected inflation at the same time that weak job growth has raised concern about the health of the labour market.

The Fed cut interest rates earlier this month for the first time this year, but Powell offered little indication of when he thinks the U.S. central bank might next ease monetary policy.

The Fed chair also said that equity prices are fairly highly valued, with the benchmark indices on Wall Street all hitting all-time highs recently.

In Europe, the flash PMIs for the eurozone, released on Tuesday, offered some good news, as business activity grew at its fastest pace in 16 months in September.

However, the survey also highlighted a stark difference between the bloc’s two biggest economies of Germany and France with the former – Europe’s largest – accelerating, while political woes kept the latter on the backfoot.

The German Ifo business climate is due later in the session, and is expected to confirm an improvement in sentiment.