European stocks are expected to drift lower Tuesday as investors rekindle political concerns in the region and focus on currency markets ahead of German and U.S. inflation data later in the session.
Britain’s FTSE 100 will open for the first day of trading since Friday with a modest 16 point pullback, according to financial bookmakers IG, while benchmarks in Germany and France will likely fall by around 0.1% at the opening bell.
Much of the early market focus, however, will remain on currency markets and the euro, which was marked 0.35% lower against the U.S. dollar at 1.1127 overnight following comments from European Central Bank President Mario Draghi which indicated a preference for continuing the “substantial” amount of stimulus currently in place to ensure the region’s nascent recovery remains on track.
“Despite a firmer recovery, and looking through the volatile readings in HICP inflation over recent months, underlying inflation pressures have remained subdued,” Draghi said. “Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective. For domestic price pressures to strengthen, we still need very accommodative financing conditions, which are themselves dependent on a fairly substantial amount of monetary accommodation.”
The dovish tone of the comments, made during an appearance before European lawmakers Monday in Brussels, added to the single currency’s pressure after reports from the German media suggested Greece could default of on of the upcoming payments linked to its 2015 bailout agreement.
Airline stocks are likely to be active at the open of trading after a weekend of chaos at London’s Gatwick and Heathrow airports caused delays and cancellations for thousands of travellers following a global IT failure that could cost British Airways more than £100 million in passenger compensation.