In a promising start to the new month, European stock markets continued their upward trajectory on Friday, building on the positive momentum from November. The renewed optimism stems from growing belief that the European Central Bank (ECB) has concluded its cycle of rate hikes.
As of 03:05 ET (08:05 GMT), Germany’s DAX index exhibited a 0.6% increase, France’s CAC 40 showed a 0.7% gain, and the U.K.’s FTSE 100 rose by 0.5%.
November marked the best performance for European stocks since January, propelled by a decline in inflation, fostering speculation that the ECB has completed its aggressive rate-hiking strategy.
This sentiment was reinforced on Thursday with data revealing that eurozone inflation for November decreased to 2.4%, down from 2.9% in October and below market expectations.
While ECB officials have downplayed the likelihood of rate cuts in the upcoming year, Fabio Panetta, the new governor of the Bank of Italy and an ECB governing council member, emphasized on Thursday that the ECB should avoid causing “unnecessary damage” to the economy and financial stability through prolonged high-interest rates.
Investors eagerly await insights into future monetary policy from ECB President Christine Lagarde and Fed Chair Jerome Powell later in the session.
Later today, the latest data on manufacturing activity in the eurozone is anticipated, with expectations that it will confirm the sector’s continued contraction in November.
In a global context, an unexpected rebound in Chinese manufacturing activity in November has further contributed to the positive market sentiment. The private Caixin/S&P Global manufacturing purchasing managers’ index rose to 50.7, surpassing the 50-mark that delineates growth from contraction.
However, an official survey a day earlier had revealed contraction in both manufacturers’ and non-manufacturers’ activity in China, highlighting challenges in the world’s second-largest economy and a crucial export market for top European companies.
On the commodities front, oil prices retreated on Friday, extending losses from the previous session. This followed disappointment as voluntary oil output cuts by OPEC+ producers failed to meet expectations.
As of 03:05 ET, U.S. crude futures were 0.1% lower at $75.87 a barrel, and the Brent contract dropped 0.2% to $80.71 a barrel. Both contracts experienced losses exceeding 6% in November.
OPEC+ agreed to a voluntary output reduction of 900,000 barrels per day, supplementing the extension of 1.3 million barrels per day in existing production cuts. While these measures are expected to alleviate a crude oil surplus in the first quarter of 2024, supplies are anticipated to be less constrained than initially projected.
In addition, gold futures experienced a 0.2% increase to $2,041.60/oz, and the EUR/USD pair traded 0.1% higher at 1.0898.
