European shares seen lower on Fed rate hike bets, tech weakness

• European shares are expected to open lower on Tuesday.
• Traders are pricing in 50 basis points of Fed rate hikes by year-end.
• The European Central Bank is also anticipated to raise rates.
• The Japanese yen is nearing 40-year lows against the dollar.
• Concerns about joint intervention have been prompted by the yen's weakness.
• The South Korean won depreciated against the U.S. dollar.
• The South Korean won is trading at 1,539.1 won per dollar.
• Foreign investors are selling local stocks in South Korea.
• Euro zone inflation may stay above 2% until the first half of 2027.
• High energy prices are expected to weigh on economic activity in the Euro zone.

European shares are anticipated to open lower on Tuesday, pressured by expectations of further interest rate hikes from the U.S. Federal Reserve and a weakening technology sector. Traders are factoring in approximately 50 basis points of Fed rate increases by the end of the year. The European Central Bank is also expected to implement rate hikes.

The Japanese yen is nearing 40-year lows against the U.S. dollar, sparking concerns about the possibility of coordinated intervention by central banks. In parallel, the South Korean won has depreciated against the dollar, trading at 1,539.1 won per dollar. This weakening of the won is attributed to renewed expectations of a U.S. Federal Reserve rate hike this year and outflows from foreign investors selling local stocks. Global markets are exhibiting weakness, with futures indicating declines in European and U.S. equities.

Euro zone inflation could remain elevated above the European Central Bank's 2% target until the first half of 2027, even under scenarios where peace is achieved in the Middle East. This projection comes from ECB chief economist Philip Lane. High energy prices are expected to negatively impact economic activity. However, a robust labor market and increased government spending are anticipated to provide some level of support to the economy.