European stocks eke out gains as investors await Powell comments

European stock markets made small gains and the dollar strengthened against other currencies on Tuesday as investors awaited comments from the Federal Reserve chair on the outlook for US interest rates.

Europe’s benchmark Stoxx 600 index rose 0.2 per cent in early trade and the FTSE 100 rose 0.4 per cent ahead of a public appearance by Federal Reserve chair Jay Powell at 5pm London time, where he is expected to address the implications of last week’s blockbuster US jobs report.

The figure was far stronger than investors had expected, raising market concerns that it could lead to a higher peak in US interest rates. American government bonds and equities have sold off since the data was released.

Indicating investors’ uncertainty, the Dax in Germany slipped 0.1 per cent and US futures tracking the S&P 500 were also soft, down 0.1 per cent on Tuesday. The greenback rose 0.1 per cent against a basket of six other currencies while the yield on the benchmark US 10-year Treasury was flat.

“All eyes will be on Fed chair Powell’s interview today at the Economic Club of Washington, DC . . . Clearly any implication that there are upside risks to the Fed’s rate outlook would validate the shift in market pricing over the last couple of days,” said Deutsche Bank analysts in a note.

German industrial output slumped, falling 3.1 per cent against expectations of a contraction of 0.7 per cent. After taking into account revisions to October’s data, output is now 5.5 per cent below its level just before Russia’s invasion of Ukraine last February, according to Capital Economics.

“December’s drop could be an initial sign that, after being fairly resilient throughout last year, German industry is finally suffering the full force of the energy crisis,” said the research company.

Meanwhile, Asian stocks rose, with the Chinese CSI 300 rising 0.2 per cent. Hong Kong’s Hang Seng index closed 0.4 per cent higher.