European Stocks Higher; German CPI Data Soars

European stock markets are expected to open higher Tuesday, rebounding to a degree after the previous session’s sharp losses, but concerns remain that aggressive monetary tightening will stunt economic growth in the region.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 1% higher, CAC 40 futures in France climbed 0.9% and the FTSE 100 futures contract in the U.K. rose 0.1%.

European equities closed sharply lower Monday, following the global trend after last week’s hot U.S. inflation report nixed hopes that price rises were peaking. This was seen increasing the chances that the Federal Reserve, which announces its latest rate decision on Wednesday, will continue its aggressive monetary tightening for longer than already priced in.

The European Central Bank confirmed late last week that it intends to start its rate hiking cycle in July, and suggested that another increase in September will depend on the inflation data over the summer.

German consumer prices rose 0.9% on the month in May, data showed Tuesday, after a gain of 0.8% the previous month. However, the annual figure climbed to 7.9%, from 7.4% in April, suggesting that the ECB has its work cut out controlling inflation in the Eurozone’s largest economy.

The Bank of England also meets on Thursday, and is expected to continue its cycle of rate hikes despite Monday’s data showing a contraction in the country’s GDP in April.

Data released Tuesday showed another fall in the U.K. claimant count of 19,700 in May, but April’s average earnings (including bonuses) soared 6.8%, illustrating the dilemma the central bank is under.

Other data due for release Tuesday includes Eurozone industrial production data for April and Germany’s ZEW index of economic sentiment for June.

Elsewhere, the U.K. and the European Union are heading for another Brexit battle after the U.K. government published a plan on Monday, providing ministers with the power to unilaterally rewrite the bulk of the Northern Ireland protocol.

Oil prices stabilized Tuesday as traders continued to digest new COVID cases in China and the prospect of further U.S. monetary tightening weighing on global growth.

Attention later in the session is likely to focus on the release of the weekly U.S. inventory data from the industry body American Petroleum Institute, ahead of Wednesday’s official numbers from the U.S. Energy Information Administration, for clues on how tight crude and fuel supply remain in the world’s largest consumer.

By 2:05 AM ET, U.S. crude futures traded 0.6% higher at $121.62 a barrel, while the Brent contract rose 0.6% to $123.02.

Additionally, gold futures fell 0.1% to $1,829.80/oz, while EUR/USD traded 0.2% higher at 1.0432.