European Stock Futures Largely Lower; Higher Yields and Rising Covid Cases Weigh


By Peter Nurse – European stock markets are seen opening largely lower Friday, following a sharp selloff in the tech sector on Wall Street while investors also fret about the increase in Covid-19 cases throughout the region.

At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.1% higher, but CAC 40 futures in France dropped 0.8% and the FTSE 100 futures contract in the U.K. fell 1.6%.

The tech-heavy Nasdaq Composite index closed 3% lower on Wall Street Thursday after a spike in U.S. bond yields on the back of the Federal Reserve’s dovish message prompted worries about owning these extremely highly-valued stocks that are likely to take a long time to generate meaningful amounts of cash.

The yield on benchmark 10-year U.S. Treasury notes stood at 1.7% Friday, after spiking late Thursday to 1.75%, the highest since early 2020, a day after the Federal Reserve raised its growth and inflation forecasts but stated it would maintain its very accommodative monetary policies through 2023.

The growth outlook looks different in Europe, as a third wave of Covid-19 infections threatens further lockdowns, further delaying the economic recovery.

Germany, the largest EU country in terms of population, recorded Thursday the biggest daily rise in confirmed coronavirus cases since Jan. 22. In addition, France said it would put eight regions, including the Ile de France region around Paris, back into a tighter form of lockdown for a month to stop the disease’s spread.

There was some good news on that front Thursday, with the EU drugs regulator confirming that the benefits of AstraZeneca’s Covid-19 vaccine outweighed the risks. But the earlier suspension of the use of this drug by a number of European countries has been another factor slowing what is already a sluggish vaccination rollout across the EU

In the corporate sector, along with the tech sector, the heavily-weighted oil stocks are set to drag the overall market lower after crude prices weakened Friday, continuing the recent sharp selloff amid worries over the slow growth to global demand.

U.S. crude futures traded 0.5% lower at $ 59.69 a barrel, while the Brent contract fell 0.5% to $ 62.97. Both contracts are falling for the sixth day in a row and have dropped more than 8% each this week, on course for the biggest weekly loss since October.

Elsewhere, gold futures rose 0.5% to $ 1,740.55/oz, while EUR/USD traded 0.1% lower at 1.1925.

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