European stock futures weaken;  Recession fears grow

European stock futures weaken; Recession fears grow

Written by Peter Norse – European stock markets are expected to open lower on Friday, following Wall Street south amid renewed concerns that aggressive monetary tightening will trigger a global recession.

At 02:00 ET (06:00 GMT), the contract in Germany was down 0.9%, the France contract was down 0.6% and the UK contract was down 0.4%.

European stocks received a negative delivery from Wall Street, with major US indexes closing sharply lower. Technology companies led the way, down 1.4%, the broad index shed 1.1%, while blue chips slid 0.6%, to their lowest close in two months.

Investors are bracing for another big interest rate hike by next week, following this week’s heated report, which is likely to further dent economic activity in the world’s largest economy and the main driver of growth.

Attention in Europe will turn to the August data release, at 05:00 ET (09:00 GMT), which is expected to rise 0.5% in the month, up 9.1% on the year.

It raised key interest rates by 75 historical basis points last week, and signaled more hikes ahead as policy makers try to control these higher rates.

Both the World Bank and the International Monetary Fund warned Thursday of an impending global economic slowdown, with Endermit Gill, the World Bank’s chief economist, saying he was concerned about “generalized stagflation,” a period of low growth and high inflation.

These concerns overshadowed the release earlier on Friday of the better-than-expected for the Chinese and in August.

By contrast, the United Kingdom fell 1.6% month-on-month in August, down 5.4% year-on-year, according to data released on Friday, as consumers curbed discretionary spending as energy and food prices soared.

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In corporate news, the energy sector is likely to be in the spotlight, as Germany placed the German subsidiary of Russian oil giant Rosneft under tutelage on Friday, handing control of the PCK refinery in Schwedt to the federal regulator.

Germany is also close to acquiring a controlling stake in troubled gas importer Uniper (ETR :), which could pave the way for a full nationalization of the company.

Oil prices rose on Friday, rebounding after heavy losses in the previous session, but were heading for a third consecutive week of losses amid concerns that aggressive monetary tightening will hurt global growth and thus fuel demand.

The crude oil market was also hit hard in the wake of hot US inflation data, which makes oil more expensive for buyers using other currencies.

By 02:00 ET (06:00 GMT), futures were up 0.2% at $85.30 a barrel, while the contract was up 0.3% at $91.07. Both contracts were down about 4% on Thursday, and were set to lose nearly 2% for the week.

In addition, it was down 0.4% at $1,670.55 an ounce, while trading was down 0.2% at 0.9979.

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