European stock futures lower; German factory orders rebound

European stock markets are expected to open weaker Monday as investors digest the global economic outlook in the wake of strong U.S. payrolls data amid raised Sino-U.S. geopolitical tensions.

At 02:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.5% lower, CAC 40 futures in France dropped 0.6%, while the FTSE 100 futures contract in the U.K. fell 0.4%.

European stocks are likely to follow their Asian counterparts lower Monday after Friday’s strong U.S. jobs data provided more room for the Federal Reserve to continue tightening interest rates to combat inflation, raising fears that the largest economy in the world, and major growth driver, could fall into recession this year.

The Fed raised interest rates by just 25 basis points on Wednesday, boosting investors’ hopes that the influential U.S. central bank could be on the verge of ending its tightening run. This had resulted in global stocks rising into Friday’s payrolls reading, creating room for profit taking on Monday. 

Also weighing on sentiment was the news that the U.S. shot down a suspected Chinese spy balloon over the weekend, a move that was condemned by Beijing which claimed the balloon was used for meteorological purposes and had accidentally drifted into U.S. airspace.

Back in Europe, the European Central Bank hiked rates by 50 basis points last Thursday and indicated that another hike was likely at its next meeting in March, with ECB President Christine Lagarde citing high core inflation.

Germany is set to release January inflation data – delayed from last week – on Thursday. 

Ahead of that, the Eurozone’s largest economy recorded monthly growth in its factory orders of 3.2% in December, a rebound from the revised slump of 4.4% the previous month.

Eurozone retail sales for December are due for release later in the session, and are expected to show a fall of 2.5% on the month, an annual drop of 2.7%.

Oil prices edged higher Monday, rebounding after last week’s hefty losses, helped by positive comments on the potential recovery in Chinese demand this year from the International Energy Agency. 

IEA head Fatih Birol indicated over the weekend that early signs pointed to a stronger-than-anticipated rebound in China’s economy, likely resulting in a healthy boost to crude demand from the world’s largest importer.

Oil prices slumped last week to more than three-week lows on fears slower growth in major economies like the U.S. and Europe may limit fuel consumption in 2023.

By 02:00 ET, U.S. crude futures traded 0.3% higher at $73.64 a barrel, while the Brent contract rose 0.5% to $80.31. Both contracts dropped 3% on Friday after strong U.S. jobs data, resulting in losses of around 8% over the course of the week. 

Additionally, gold futures rose 0.6% to $1,887.65/oz, while EUR/USD traded 0.1% lower at 1.0784.

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