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Stock Futures Point A Lower Open


25 November 2021 Written by Naeem Aslam  AvaTrade Chief Market Analyst Naeem Aslam

European stock futures are pointing to a higher open on Thursday while investors continue to closely follow the surge in Covid cases and political developments in Germany. Markets in the United States will be closed on Thursday for Thanksgiving and will shut early on Friday in a shorter session. This means volume in the markets is expected to remain light. As for the economic docket, a comprehensive picture of Germany’s third-quarter GDP will be published. In addition, we will also see the December reading of Germany’s GfK consumer confidence barometer.

The FTSE index in the United Kingdom is expected to open 18 points higher at 7,303, the DAX in Germany to open 59 points higher at 15,955, the CAC 40 in France to open 30 points higher at 7,078 and the FTSE MIB in Italy to open 154 points higher at 27,233.

German Elections

Investors will be absorbing the recent news from Germany, where the Social Democrats, Greens, and Free Democrats announced a new coalition government pact on Wednesday. After over two months of negotiations following the country’s indecisive federal election in September, Germany has confirmed a coalition agreement. The SPD, the Greens, and the Free Democratic Party have agreed to rule together in a three-way coalition for the first time. In allusion to the parties’ traditional colours, the partnership has been dubbed a “traffic light” coalition.

According to the agreement, Christian Lindner, the chairman of the pro-business FDP, will be the new finance minister, which was revealed Wednesday afternoon and should now be elected by the various parties. Annalena Baerbock and Robert Habeck, co-leaders of the Green Party, are set to become Foreign Minister and Economy and Climate Minister, respectively.

The deal calls for Olaf Scholz, Germany’s former finance minister, to take over as Chancellor when Angela Merkel steps down in early December.

Covid Cases

This week, investors and traders in Europe are keeping a close eye on the region’s critical Covid resurgence, which has caused a number of nations to impose fresh Covid restrictions. Italy stated on Wednesday evening that it will tighten Covid controls, and Germany barely averted another lockdown, with the incoming government allegedly seeking to test if tougher Covid passport regulations can help ease mounting instances there. Nonetheless, new German leader Olaf Scholz announced on Wednesday that vaccines will be made mandatory for some populations.

Oil

Oil prices are trading flat on Thursday as investors are awaiting how big producers of oil, would react to the emergency crude release by key consuming countries aimed to calm the market, despite statistics showing solid U.S. gasoline demand. The fact is that the coordinated SPR (Strategic Petroleum Reserve) release is only a short-term fix and it may help the politicians to score a quick win ahead of the Thanksgiving holiday period but we doubt if it is actually going to resolve the underlying issues. Hence, all eyes are likely to remain on the Organization of the Petroleum Exporting Countries, Russia, and allies, collectively known as OPEC+, who are set to speak next week to analyse oil demand and supply.

Gold

Gold prices rose marginally on Thursday as the dollar index fell, but what matters the most for gold is the remarks from US Federal Reserve Chairman. The FOMC minutes showed yesterday that a rising number of Fed members suggested they would be willing to accelerate the end of their bond-buying programme if high inflation persisted and move more swiftly to increase interest rates.

So far, the message seems to be suggesting that the Fed might expedite stimulus reduction, and this is having an adverse influence on the precious metal. The gold price continues to trade below the critical $1,800 level.

Yesterday, we saw the US Weekly Jobless Claims data printing the lowest reading since 1969. This indicates that economic activity has picked up more momentum than expected. Of course, the Fed watches the labour market data very closely and their monetary policy decision is closely based on this fundamental factor. Traders should keep in mind that an increase in interest rates should lower the attraction of bullion, since higher rates boost the opportunity cost of the non-interest-bearing metal.

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