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European Shares Set To Drift Lower As Recession Fears Take Hold

stockmarkets aug16 23jun22 lt

European stocks are seen opening slightly lower on Thursday after Federal Reserve Chair Jerome Powell gave his most explicit acknowledgment to date that monetary policy is famously a blunt tool and there is a risk of recession.

Chicago Federal Reserve Bank President Charles Evans on Wednesday signaled he'd likely back another big interest rate hike in July to battle 40-year high inflation.

Powell's second day of Congressional testimony is likely to attract attention later today along with the Labor Department's report on weekly jobless claims.

Closer home, Eurozone preliminary services and manufacturing purchasing managers' index data for June will be released later in the day.

Asian markets traded mostly higher and the dollar slipped against major peers for a fourth day, while oil prices continued to pull back, dropping nearly 2 percent on worries of a slowdown in fuel demand.

Overnight, U.S. stocks ended modestly lower and the dollar fell alongside Treasury yields as Fed Chair Powell said the central bank will look for "compelling evidence" that inflation is cooling before it begins to scale back its monetary policy tightening plans.

Powell later acknowledged that achieving a "soft landing" will be "very challenging" due in part to factors outside of the Fed's control and noted a recession is "certainly a possibility."

The Dow and the Nasdaq Composite slipped around 0.2 percent each, while the S&P 500 finished 0.1 percent lower.

European stocks closed notably lower on Wednesday as surging U.K. inflation revived fears about aggressive monetary tightening and slowing growth.

The pan European Stoxx 600 declined 0.7 percent. The German DAX tumbled 1.1 percent, France's CAC 40 index shed 0.8 percent and the U.K.'s FTSE 100 gave up 0.9 percent.

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