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Leading European stock markets reflected a cautiously positive sentiment on Friday as investors watched for progress on Ukraine peace talks and awaited a speech from US Federal Reserve chair Jerome Powell. He will speak on Friday at Jackson Hole, where central bankers gather for their annual meeting.
Markets also digested details of an EU-US trade truce and better-than-expected business activity data, announced on Thursday.
Despite the news that the German economy shrank more than initially estimated in the second quarter, the German DAX changed direction and made up its earlier losses, gaining around 0.1% after 11.00 CEST.
The FTSE 100, though trading in negative territory all morning, also followed suit and changed course, gaining a few points by late morning.
The Paris CAC 40 was up 0.2%, the Madrid IBEX 35 rose by 0.4%, and the European benchmark STOXX 600 increased by 0.2%.
As for the London blue chip index, the early morning slight dip appeared to be just a small correction. “The FTSE 100 saw a subdued start on Friday after achieving a record close above 9,300 yesterday,” said AJ Bell investment analyst Dan Coatsworth in his note.
Investors are focusing on the message Federal Reserve chair Jerome Powell might deliver at the Jackson Hole summit in Wyoming.
“Investors had been expecting a rate cut from the Fed next month so if Powell were to say anything suggesting rates might be kept on hold, it could see stocks come under greater pressure,” said Coatsworth. He added that robust PMI data from the US on Thursday pointed to a strong economy, potentially reducing the chances of the Fed lowering borrowing costs.
A cut in interest rates would be the first of the year and it would give asset prices and the economy a boost — but it could also risk worsening inflation.
The Fed has been hesitant to cut interest rates this year out of fear that President Donald Trump’s tariffs could push inflation higher, but a surprisingly weak report on employment growth earlier this month suddenly shifted focus towards the job market. Trump, meanwhile, has forcefully pushed for cuts to interest rates, directing fierce criticism towards Powell.
US markets closed in a gloomy mood
On Wall Street on Thursday, the S&P 500 slipped 0.4% to 6,370.17, continuing a gradual decline since a record on 14 August. The Dow Jones Industrial Average dropped 0.3% to 44,875.50, and the Nasdaq composite fell 0.3% to 21,100.31.
In other dealings early on Friday, the US dollar rose to 148.48 Japanese yen, from 148.37 yen. The euro slipped to $1.1590 from $1.1606.
Meanwhile, oil prices fell by midday in Europe; the US benchmark crude lost 0.2% and was traded at $63.38 per barrel. Brent crude, the international standard, also was down by 0.2% at $67.52 per barrel.
Oil prices moved higher yesterday, “as the initial enthusiasm over progress towards a ceasefire between Russia and Ukraine continues to fade”, said ING in a note. Expectations of increased global uncertainty are driven by the difficulties of setting up a Putin-Zelensky summit and securing potential security guarantees for Ukraine.
Asian markets were also mixed on Friday
Asian shares were also mixed on Friday. In Tokyo, the Nikkei 225 rose less than 0.1% to 42,633.29 after Japan’s core inflation rate slowed to 3.1% in July, from 3.3% in June.
ING Economics said in a note that price pressures were broadly in line with market consensus. Inflation staying above 3% raises the likelihood of a rate hike as soon as October, it said.
In Chinese markets, Hong Kong’s Hang Seng index rose 0.9% to 25,339.14. The Shanghai composite index climbed 1.5% to 3,825.76.
South Korea’s Kospi added 0.9% to 3,168.73. Australia’s S&P/ASX 200 fell 0.6% to 8,967.40 as traders sold to lock in gains after the benchmark surged to record highs in recent trading sessions.