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Stocks – Europe Seen Mixed; Fed Helps But Auto Sector Suffers

European stock markets are seen opening mixed Thursday, helped by strong gains on Wall Street after the Federal Reserve reiterated its support for the U.S. economy but weighed down by disappointing corporate news, particularly from the auto sector.

At 2:10 AM ET (0610 GMT), the DAX futures contract in Germany traded 0.4% lower, the FTSE 100 futures contract in the U.K. rose 0.3%, while CAC 40 futures in France climbed 0.3%.

Late Wednesday, the Dow Jones Industrial Average closed 0.6% higher, the Nasdaq Composite gained 1.4% and the S&P 500 added 1.2%, after the U.S. Federal Reserve kept its benchmark rate near zero and suggested rates would remain in this range for some time.

“The economy will need high levels of accommodative monetary policy for an extended period,” Fed chairman Jerome Powell said.

This now puts the focus squarely on Capitol Hill to see whether Republicans and Democrats can reach a consensus on the latest stimulus measures before the expiry of some existing measures on Friday.

Second quarter GDP figures are due for release later Wednesday in both the U.S. and Germany and will reveal the depth of the economic fallout from the pandemic. Expectations are for an annualized decline in U.S. GDP of 34% on the quarter and an absolute decline of 9.0% in Germany.

July unemployment figures from Germany will also be studied carefully. So far job losses have stayed relatively contained in Europe thanks to governments’ job retention schemes, but these can’t last forever and earnings data so far has suggested many companies remain under pressure.

Airbus Group SE (PA:AIR) announced a fresh cut in production of its A350 long-range jet on Thursday as it posted a larger-than-expected second-quarter loss.

French carmaker Renault (PA:RENA) posted a record net loss of 7.292 billion euros in the first half of this year, while German rival Volkswagen (DE:VOWG_p) unveiled a first-half operating loss of 800 million euros, forcing the carmaker to slash its dividend.

Oil prices were largely unchanged Thursday, with traders having to weigh up the competing influences of a huge drop in U.S. crude oil supplies with signs that the recovery in demand is struggling to gain traction.

The U.S. Energy Information Administration recorded late Wednesday a 10.612 million-barrel draw in inventories for the week ending July 24, its biggest since 2019. On Tuesday, the oil industry’s own data showed a draw down of 6.8 million barrels last week.

However, “a resurgence in Covid-19 cases, along with continued travel restrictions has meant that this demand recovery has stalled, or at least slowed. This does not come at a great time for the market, with OPEC+ supply set to increase, with the group easing cuts from the 1 August,” said analysts at ING, in a research note.

U.S. crude futures traded 0.1% lower at $41.22 a barrel, while the international benchmark Brent contract fell 0.1% to $44.06.

Elsewhere, gold futures was flat at $1,953.40/oz, while EUR/USD traded at 1.1761, down 0.3%.

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