By Peter Nurse 

- European stock markets are expected to open higher Monday, starting a new week on a positive tone despite the return of Covid-induced restrictions to the continent.  

At 2 AM ET (0700 GMT), the DAX futures contract in Germany traded 0.3% higher, CAC 40 futures in France climbed 0.4% and the FTSE 100 futures contract in the U.K. rose 0.4%.

The major equity indices in Europe have shown strength of late, boosted by strong corporate earnings and helped by the European Central Bank retaining a dovish monetary policy stance.

This strength could be tested Monday following the return of Covid-19 restrictions, with Austria starting its fourth national lockdown since the start of the pandemic. 

The lockdown is meant to put a brake on infections before mandatory vaccinations kick in from February. That would be the first such policy in Europe, where governments have mostly kept inoculations voluntary.  

Neighboring Germany also refused to rule out a lockdown on Friday, while the likes of Ireland and the Netherlands have encouraged working from home in order to try and contain the spread of the virus.

Still, the reemergence of the virus is likely to add weight to European Central Bank President Christine Lagarde’s view that tightening policy now could choke off the region’s economic recovery.

The central bank has been under increasing pressure to tighten its ultra-loose monetary policy to offset rising price pressures, especially after Eurozone inflation surged 4.1% year-on-year in October, more than twice the ECB's target.

Turning to the quarterly corporate earnings season, Swiss bank Julius Baer (SIX:BAER) reported that its profitability rose "significantly" in the first 10 months of 2021, boosted by buoyant markets and new money inflows.

Elsewhere, the telecoms sector will be in focus after Telecom Italia (MI:TLIT) stated over the weekend that it has received a 10.8 billion euro ($12 billion) approach from U.S. fund KKR aimed at taking Italy's biggest phone group private.

Additionally, mobile telecoms equipment maker Ericsson (BS:ERICAs) said it had agreed to buy cloud communications firm Vonage for $6.2 billion.   

Crude prices weakened Monday, continuing the sharp selloff at the end of last week as Japan joined a group of top consumers considering adding supply to the market following a request from the United States late last week.

Japanese Prime Minister Fumio Kishida signalled on Saturday he was ready to help combat soaring oil prices by exploring a way to release oil from the country’s strategic reserves. 

At the same time, demand could take a hit as a soaring number of Covid cases in Europe prompted further restrictions.

By 2 AM ET, U.S. crude futures traded 0.1% lower at $75.84 a barrel, while the Brent contract fell 0.3% to $78.66. Both benchmarks hit their lowest levels since the start of October earlier in the session, having fallen around 3% on Friday. 

Additionally, gold futures fell 0.5% to $1,843.40/oz, while EUR/USD traded 0.2% lower at 1.1268.