Investing.com – European stock markets are seen opening sharply lower Thursday, weighed by concerns from the Federal Reserve about the state of the U.S. recovery as well as renewed political tensions between the U.S. and China.
The path to economic recovery for the U.S. economy from the Covid-19 outbreak remains highly uncertain, the Federal Reserve warned, according to minutes from its latest meeting, released late Wednesday.
“The minutes to the July 29th FOMC meeting are not especially reassuring,” said analyst James Knightley at ING, in a research note.
“The commentary suggests an ongoing weak economic backdrop whereby inflation remains persistently low yet there is little inclination to offer additional imminent support to the economy.”
Members of the Federal Reserve have been keen to stress the need for additional fiscal stimulus, but a deal in Congress for a new, comprehensive relief package seems as far away as ever.
Meanwhile, tensions between the U.S. and China, the globe’s two economic superpowers, were ratcheted up another notch after the U.S. announced it is suspending its extradition treaty with Hong Kong and ending reciprocal tax treatment with the former British colony.
The moves are part of the Trump administration’s efforts to pressure China over the imposition of a national security law that curtailed many of Hong Kong’s freedoms.
Back in Europe, the account of the latest European Central Bank monetary policy meeting are due to be published later Thursday, and will be studied for clues on the central bank’s thinking going forward.
Oil prices weakened, as the Fed minutes amounted to a warning about the recovery in demand, while U.S. oil inventories dropped for a fourth straight week, but by only 1.6 million barrels, less than expected.
Members of OPEC+, a group of major oil producers, warned Wednesday that the global rebound in demand was taking place at a slower pace than expected, and a second wave of the Covid-19 virus could do even more damage.