European stock markets are set to open mixed Tuesday, with concerns about the German central bank’s participation in the ECB’s stimulus package weighing, despite a strong close on Wall Street.
At 2:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.2% lower. France's CAC 40 futures were up 0.7%, while the FTSE 100 futures contract in the U.K. rose 0.2%.
European Central Bank President Christine Lagarde was forced Monday to defend the stimulus measures taken by the region’s central bank to combat the coronavirus pandemic from criticism by some lawmakers at a hearing in the European Parliament.
"Our crisis-related measures are temporary, targeted and proportionate ... to the severe risks to our mandate that we are facing," Lagarde told EU lawmakers.
This comes after Germany's Constitutional Court gave the ECB three months to justify the massive purchases of government bonds or lose the German Bundesbank as the main buyer in its key debt-buying scheme.
“She emphasised that this decision was not addressed to the ECB, leaving this a domestic German issue,” said analysts at Danske Bank, in a research note. “Unless solved, the Bundesbank should not be able to participate in the PSPP programme from 5 August.”
That said, there is still a general wave of optimism running through equity markets as the global economy recovers from the ravages of the Covid-19 virus.
Wall Street closed higher Monday, with the Dow Jones Industrial Average rising 1.7%, the S&P 500 gaining 1.2% to end in positive territory for the year, and the Nasdaq Composite adding 1.1% to hit a record closing high.
Investors will now turn to the Federal Reserve's two-day policy meeting, which ends on Wednesday, for further clarity on U.S. monetary policy.
In corporate news, BP (LON:BP) could be in the spotlight Tuesday after the oil major announced plans to cut 10,000 jobs following a global slump in demand for crude.
The oil giant had paused redundancies during the peak of the pandemic but told staff on Monday that around 15% will leave by the end of the year.
Tesco (LON:TSCO) could be in focus after the U.K. regulator announced the closure of its remaining investigation into accountants at the retailing giant, ending a six-year probe linked to an overstatement of profit by the supermarket chain.
Oil prices edged higher Tuesday, rebounding a touch after Monday’s selloff of more than 3%, the first major move lower in 10 days in what looks an overdue correction after recent hefty gains.
Crude has risen strongly from the lows in April--WTI has jumped 300% and Brent 170%--on a combination of record oil production cuts instigated by the Organization of Petroleum Exporting Countries and its allies, including Russia, and signs of increased demand as the global economy restarted.
At 2:00 AM ET, U.S. crude futures traded 1.1% higher at $38.61 a barrel. The international benchmark Brent contract rose 0.8% to $41.11.
Elsewhere, gold futures fell 0.2% to $1,701.20/oz, while EUR/USD traded at 1.1292, flat on the day.
