European Stocks Higher; Rebounding After Powell-Induced Selloff

European stock markets traded higher Wednesday, rebounding after Federal Reserve chairman Jerome Powell guaranteed a rough end to November with his hawkish turn in Congress on Tuesday.

Powell signalled on Tuesday the U.S. central bank may speed up the pace of its bond-buying taper at its meeting later this month, acknowledging that inflation is proving to be more sustained and troublesome than he had expected.

At 3:40 AM ET (0840 GMT), the DAX in Germany traded 0.7% higher, the CAC 40 in France also rose 0.6% and the U.K.’s FTSE 100 climbed 1%.

The positive start to December comes after global stock markets had ended the previous month with sharp losses as fears about the impact of the new coronavirus variant triggered a broad sell-off.

Helping the tone Wednesday were comments from Israeli Health Minister Nitzan Horowitz, who stated that early data showed that those who have three doses of the Pfizer (NYSE:PFE) Covid vaccine are well protected against the new omicron variant.

Travel and leisure stocks were well bid, with Wizz Air (LON:WIZZ) stock, IAG (LON:ICAG) stock and EasyJet (LON:EZJ) stock all rising over 4% and hotel operators Melia (MC:MEL) and Accor (PA:ACCP) gaining over 3% each.

That said, the surge in Covid cases remains a potential stumbling block for the region’s recovery. Earlier Wednesday, the head of the Germany’s DIVI intensive-care medicine lobby said Europe’s largest economy urgently needs stricter measures to check a surge in infections and protect hospitals from a “particularly dangerous situation.”

Turning to economic data, China’s factory activity fell back into contraction in November, according to a business survey, with the Caixin/Markit Manufacturing Purchasing Managers’ Index dropping to 49.9 in November from 50.6 the month before.

The equivalent data is also due from the Eurozone later Wednesday, while German retail sales fell 2.9% on the year in October, a sharp retreat from the revised -0.6% figure seen the month before. ING analyst Carsten Brzeski said he expects private consumption in Europe’s largest economy to be a drag on growth in the fourth quarter, with an eye on soaring energy bills and renewed mobility restrictions.

Crude prices traded higher Wednesday, recouping some of the hefty losses of the previous session, ahead of a key meeting of top producers to decide future output levels.

The Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+, gets together on Thursday. Expectations are growing that the members will agree to pause plans to add 400,000 barrels per day of supply in January given the potential hit to demand from the travel restrictions put in place to tackle the new omicron variant.

The American Petroleum Institute reported a fall of 747,000 barrels from U.S. crude inventories for last week, a smaller draw than expected, and investors now await crude oil supply from the U.S. Energy Information Administration at 10:30 AM ET.

By 3:40 AM ET, U.S. Crude futures traded 4% higher at $68.81 a barrel, having slumped 5.4% on Tuesday, while the Brent contract rose 4.3% to $72.19, after falling 3.9% during the previous session.

Additionally, gold futures rose 0.2% to $1,780.05/oz, while EUR/USD traded 0.3% lower at 1.1305.