Futures are expected to open higher ahead of US consumer confidence

As consumer sentiment in Germany, the dominant economy of the Eurozone has picked up in recent days, the stock markets are expected to open higher on Wednesday. This follows the previous session's weakness. There was a 0.7% increase in the DAX futures contract in Germany, a 0.4% increase in the CAC 40 futures contract in France, and a 0.4% increase in the FTSE 100 futures contract in the UK. The forward-looking Consumer Sentiment Index released earlier this week by the GfK institute indicates that German consumers are likely to show a small improvement in January. Despite government energy measures helping stabilize morale in November, the index showed -37.8 as a result of a small but gradual improvement from the revised -40.1 the prior month, and October's -42.8, the lowest reading in over a decade.

Data from a survey released earlier this week suggested there was an increase in German business morale during December, with the Ifo institute indicating that the outlook for Europe's largest economy was improving despite the energy crisis and high inflation, according to the survey. As the holiday season unravels, businesses around the globe are filling their hearts with hope, according to a report released by the think-tank on Monday. There is a growing belief among investors that the recession expected at the beginning of 2023 might not be as severe as previously expected, helping the European equity markets to end the year on a more positive note.

As US Treasury yields remain elevated despite the overall market consolidation, the US Dollar Index (DXY) picked up bids to pare recent losses around 104.10. This marks the end of a two-day downtrend with mild gains. Nevertheless, market sentiment is favoured by hopes for more Chinese investment, mainly because the World Bank has cut its growth forecasts for the dragon nation, and policymakers have shown that they are willing to fight recession fears. It would appear that the Senate's passage of the $1.66 trillion government spending bill and Japan's upbeat economic forecasts could be considered on the same line. US Treasury bond yields are firmer even as stocks and other riskier assets trim recent gains.

In the European stock market, stocks closed Tuesday broadly lower as investors were caught by surprise by the Bank of Japan's announcement that it would raise the limit on 10-year Japanese government bond yields, potentially signalling an end to what has been known as the last ultra-easy monetary stance in the developed world.

Amid rising inflation at a 40-year high, the European Central Bank has already tightened monetary policy aggressively against the backdrop of the Federal Reserve and the Bank of England.

In the wake of the temporary closure of the Keystone pipeline, U.S. crude inventories have reduced more than expected. This has boosted Wednesday's oil prices amid supply disruptions caused by the temporary closure of the pipeline. According to data released by the American Petroleum Institute on Thursday, crude oil stocks in the U.S. decreased by just over 3 million barrels in the week ending Dec. 16. It is expected that the Energy Information Administration will release official inventory figures later in the session. Crude futures in the US traded 0.2% higher at $76.39 a barrel, while Brent futures rose 0.3% to $80.22. Even though oil prices have recovered in recent sessions, they still remain stuck in a downward trend as rising interest rates and high inflation have fuelled concerns over a potential recession in 2023.