European stock markets made small gains and the dollar strengthened against other currencies on Tuesday as investors awaited comments from the chairman of the Federal Reserve on the outlook for US interest rates.
Europe’s benchmark Stoxx 600 rose 0.2% at the start of trading and the FTSE 100 rose 0.4% ahead of a public appearance by Federal Reserve Chairman Jay Powell at 5 p.m. London time, where he is expected to address the implications of last week’s hit US jobs. report.
The figure was much higher than expected by investors, raising fears in the market that it could lead to a higher spike in US interest rates. US government bonds and stocks have sold off since the data was released.
Indicating investor uncertainty, the Dax in Germany slipped 0.1% and US futures following the S&P 500 were also weak, down 0.1% on Tuesday. The greenback rose 0.1% against a basket of six other currencies, while the yield on the benchmark 10-year US Treasury was flat.
“All eyes will be on Fed Chairman Powell’s interview today at the Economic Club in Washington, DC. . . Clearly, any implication that there are upside risks to the outlook for Fed rate would validate the market price change over the past two days,” Deutsche Bank analysts said in a note.
German industrial production collapsed, falling 3.1% against expectations of a 0.7% contraction. After factoring in October data revisions, output is now 5.5% below where it was just before Russia invaded Ukraine last February, according to Capital Economics.
“December’s slump could be a first sign that after being quite resilient throughout last year, German industry is finally bearing the full brunt of the energy crisis,” the research firm said.
Meanwhile, Asian stocks rose, with China’s CSI 300 rising 0.2%. Hong Kong’s Hang Seng Index closed up 0.4%.