Europe stocks slightly lower on region’s economic outlook

The DAX futures contract in Germany traded 0.3 per cent lower, CAC 40 futures in France dropped 0.2 per cent, and the FTSE 100 futures contract in the U.K. fell 0.2 per cent

European stock markets are expected to open slightly lower Tuesday, as investors fret about the region’s economic outlook while central banks continue to tackle inflation at elevated levels.

At 07:00 GMT, the DAX futures contract in Germany traded 0.3 per cent lower, CAC 40 futures in France dropped 0.2 per cent, and the FTSE 100 futures contract in the U.K. fell 0.2 per cent.

Risk-off sentiment is holding sway globally on Tuesday, with European equities set to follow the negative close on Wall Street after U.S. services sector activity unexpectedly accelerated in November, raising concerns that the Federal Reserve could continue to tighten monetary policy aggressively.

In Europe, the European Central Bank is also expected to increase interest rates next week, and will have to raise interest rates several more times to tame price pressures, according to ECB chief economist Philip Lane.

We do expect that more rate increases will be necessary, but a lot has been done already, the Italian paper Milano Finanza quoted Lane as saying on Tuesday. I would be reasonably confident in saying that it is likely we are close to peak inflation.

Data released on Monday showed that Eurozone business activity declined for a fifth month in November, indicating that the region’s economy was headed for a recession next year, while retail sales slumped as consumers slashed spending amid surging inflation.

Industrial orders from Germany, the biggest economy in the Eurozone, rose 0.8 per cent in October, data released Tuesday showed. This was more than expected, and represents an improvement from the revised 2.9 per cent drop the prior month, but offers very little to celebrate.