European Shares May See Cautious Start On Rate Hike Worries

European stocks may open flat to slightly lower on Thursday, as Treasury yields gained amid signs that the Federal Reserve would stick to hiking interest rates by 50 basis points in June and July to combat inflation.

The safe-haven dollar hovered near a one-month low as the latest FOMC meeting minutes offered few surprises, with many officials advocating the use of both interest rate increases and reductions in the size of the Fed’s balance sheet to achieve a neutral posture.

Gold dipped while oil prices rose on signs of tight supply. EU leaders are having a hard time drawing up sanctions on Russian oil, with a German official saying that it will not be a topic at the forthcoming leaders’ summit.

Asian markets gave up early gains to turn lower on concerns that the aggressive outlook for policy tightening along with uncertainty stemming from the Russia-Ukraine crisis and China’s Covid-19 lockdowns could lead to a global recession.

Advanced economies will be back on track by 2024, but developing economies will be 5 percent below where they would have been otherwise, IMF’s Gita Gopinath said on Wednesday.

It’s a quiet day on the European economic calendar. Across the Atlantic, reports on initial jobless claims and pending home sales along with a revised reading on first quarter GDP may attract attention.

Overnight, U.S. stocks fluctuated before finishing mostly higher. The Dow rose 0.6 percent, the S&P 500 gained 1 percent and the tech-heavy Nasdaq Composite climbed 1.5 percent.

European stocks closed higher on Wednesday as investors reacted to improved German consumer confidence and second estimate GDP numbers for the first quarter.

The pan European Stoxx 600 added 0.6 percent. The German DAX advanced 0.6 percent, France’s CAC 40 index surged 0.7 percent and the U.K.’s FTSE 100 added half a percent.

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