European Shares To See Cautious Open As Risk Aversion Deepens

(RTTNews) - European stocks may drift lower at open on Wednesday as worries about the U.S. banking sector deepened and data showed China's new home prices fell for the first time this year in July, complicating policy efforts to revive the economy.

Asian markets traded lower on persisting worries about the worsening economic conditions in China and signs the Federal Reserve may keep interest rates higher for longer to tame inflation.

After the release of stronger-than-expected U.S. retail sales data on Tuesday, traders now predict fewer rate cuts in 2024 than previously predicted.

Meanwhile, home improvement retailer Home Depot topped profit and sales expectations in its most recent quarter, but salles continued to decline as a result of higher inflation and soaring interest rates.

Forward-looking comments about consumer spending from Target and Walmart this week could add more understanding to consumer spending trends. Copper prices hit a two-month low and oil extended overnight losses on China demand concerns.

The dollar traded at six-week highs in Asian trading and yields held ground while gold hovered near one-month lows, as investors await the FOMC minutes and comments from Fed officials for fresh impetus.

Minneapolis Federal Reserve President Neel Kashkari on Tuesday said that inflation has shown signs of slowing in recent months, but interest rates may still need to go higher to actually get inflation all the way back down to the 2 percent target.

The European economic calendar remains heavy today, with EU industrial production data and preliminary Q2 GDP estimates likely to attract investor attention later in the day.

Overnight, U.S. stocks hit a five-week low while longer-term Treasury yields hit their highest levels this year after data showed retail sales rose more than expected in July, denting dovish Fed bets.

The sell-off was compounded by weak economic data from China and a warning from Fitch that U.S. banks, including JPMorgan Chase, could be downgraded.

The Dow dropped 1 percent, the S&P 500 declined 1.2 percent and the tech-heavy Nasdaq Composite fell 1.1 percent.

European stocks closed notably lower Tuesday on concerns about the Chinese property sector and an uncertain outlook for interest rates.

The pan European STOXX 600 shed 0.9 percent. The German DAX gave up 0.9 percent, France's CAC 40 lost 1.1 percent and the U.K.'s FTSE 100 slumped 1.6 percent.