European stock futures just lower; German inflation retreats

 European stock markets are expected to open with minor losses Wednesday, ahead of the release of key U.S. inflation data.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.1% lower, CAC 40 futures in France dropped 0.9% and the FTSE 100 futures contract in the U.K. fell 0.1%.

Fed officials hint at end of rate hikes

A degree of confidence has returned to global equity markets this week after the weekend’s shocking events in the Middle East, helped by dovish comments from a few Federal Reserve officials which have fueling hopes the world’s most important central bank is nearing the end of its interest rate increases.

“I actually don’t think we need to increase rates anymore,” Atlanta Fed President Raphael Bostic said Tuesday, at a conference in Nashville, Tennessee.

This follows several Fed officials noting that recent rises in longer-term yields may help do the central bank’s work of tightening financial conditions to tackle inflation, meaning fewer interest rate hikes.

Upcoming inflation data limits volatility

However, moves are likely to be limited ahead of the latest U.S. inflation numbers, starting later Wednesday with the September PPI release ahead of Thursday’s CPI number.

Signs underlying U.S. inflation is moderating are likely to reinforce the recent more dovish tone from Fed members about future policy, likely setting the market tone for the rest of the year.

Futures traders are currently putting a nearly 90% probability on the Fed holding rates steady when it meets again in November.

There is also inflation data to digest in Europe, as German consumer prices rose 0.3% on the month in September, an annual rise of 4.5%.

While this represents a healthy drop from the prior’s month’s 6.1% annual figure, it’s still considerably above the European Central Bank’s 2% medium term inflation target.

That said, ECB policymaker Francois Villeroy de Galhau expressed confidence on Tuesday that inflation should still hit target by 2025 even with the violence in Israel weighing on commodity prices.

Crude edges higher on supply concerns

Oil prices edged higher Wednesday as traders still grappled with the potential of supply disruptions due to the turmoil in the Middle East.

The market has calmed down significantly after both crude benchmark contracts rose just over 4% on Monday, but fears remain of political and economic contagion from the fighting ignited by Saturday’s attacks by Palestine militant group Hamas on Israelis in Gaza.

Market participants will also be on the lookout for U.S. weekly oil inventory data from the industry body American Petroleum Institute, due a day later than usual following Monday’s Columbus Day holiday.

By 02:00 ET, the U.S. crude futures traded 0.2% higher at $86.10 a barrel, while the Brent contract climbed 0.1% to $87.77.

Additionally, gold futures fell 0.1% to $1,872.65/oz, while EUR/USD traded just lower at 1.0601.