European stocks were lower in morning trading after a heavy fall in Tokyo, as traders awaited Federal Reserve Chairman Jerome Powell's testimony before the Senate Banking Committee and personal consumption expenditure data.
"Markets will be looking to see whether he rows back a little from Tuesday's hawkish interpretation of his remarks or whether he reaffirms them," Michael Hewson, chief market analyst at CMC Markets UK, in a research note. "If he does the latter then we could well see further gains for the U.S. dollar and increased pressure on stock markets."
The FTSE 100 slipped 0.27%, Germany's DAX fell 0.93% and France's CAC 40 was down 0.55% as of 9:30 a.m. in London. The Stoxx 600 of European stocks was down 0.48%.
Japan's benchmark index plunged for the second day after the release of weak manufacturing data, while China and Hong Kong markets recovered from their previous-day losses.
Japan's Nikkei 225 closed down 1.56% after the Nikkei Japan manufacturing purchasing managers' index slipped to 54.1 in February from 54.8 in the previous month as output growth slowed for the first time since July 2017. While Japanese manufacturers were optimistic about output in the next 12 months, the threat of a stronger yen could bring downward cost pressures for manufacturers, the IHS Markit report said.
China's Shanghai Composite Index was up 0.44%, as the Caixin/IHS Markit PMI index in February climbed to 51.6. The previous day, China's official PMI fell and sent markets tumbling. Hong Kong's Hang Seng Index was up 0.62%.
Powell's Feb. 27 Congressional testimony prompted investors to reconsider the prospects of four rate rises in 2018. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5% and was set for its third day of losses, Reuters reported.
Data on personal consumption expenditures will also be key today as U.S. inflation remains below the Fed's 2% target. Powell expressed confidence that inflation will return to the Fed's target "over the medium term," attributing the recent misses to temporary factors that the Fed does not expect will repeat.
"Today's U.S. data could hammer another nail into the negative psyche of traders and investors, especially if personal spending and income data along with ISM manufacturing also miss expectations," Hewson said.
The S&P 500 and Dow Jones Industrial Average closed 1.11% and 1.50% lower, respectively, on Feb. 28.
