By Peter Nurse
Investing.com - European stock markets are expected to open marginally higher Friday, but gains are likely to be limited as China’s growth data disappointed and the political situation in Italy remains fraught.
At 02:00 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.1% higher, CAC 40 futures in France climbed 0.1%, and the FTSE 100 futures contract in the U.K. rose 0.2%.
The main European indices closed lower Thursday–with the DAX down 1.9%, the CAC 40 down 1.4%, and the FTSE 100 1.6% lower–on fears that the U.S. Federal Reserve will be pressured to increase interest rates by more than the 75 basis points it hiked in June after consumer inflation climbed to 9.1% in June, the highest level for 40 years.
Expectations of a 100 basis-point hike later this month have since eased a little after known hawks Fed Governor Christopher Waller and St. Louis Fed President James Bullard both said they favored another 75 basis-point hike for this month, in spite of the inflation figures.
This has helped the tone in Europe on Friday, as a sharp increase in U.S. interest rates runs the risk of sending the U.S. economy, the world’s main growth driver, into recession.
However, gains are likely to be limited as investors digest the political turmoil in Italy in the wake of the widely respected Mario Draghi offering his resignation as Prime Minister of Italy after losing the support of one of the country's largest political parties from his broad coalition government.
Additionally, China's economy contracted sharply in the second quarter, as GDP fell 2.6% from the previous quarter, compared with a revised 1.4% gain in the previous quarter. This highlighted the toll on activity in the world’s second-largest economy from widespread COVID lockdowns, and raised doubts about the global recovery.
In corporate news, Dutch navigation and digital mapping company TomTom (AS:TOM2) reported a larger-than-expected loss for the second quarter, citing high inflation and strained supply chains.
Swedish bank Handelsbanken (ST:SHBa) reported a second-quarter profit well below forecasts, while Barry Callebaut (SIX:BARN) plans to restart in early August the first chocolate production lines at its factory in Wieze, Belgium, following a salmonella outbreak at the site.
Oil prices edged higher Friday, but still looks likely to end below $100 a barrel for the first time since early April after red-hot U.S. inflation numbers raised concerns over a global economic slowdown.
U.S. President Joe Biden will fly to Saudi Arabia later Friday, in an attempt to get his Gulf allies to pump more oil and thus lower prices. However, he might find this difficult to achieve as spare capacity at the majority of the members of the Organization of the Petroleum Exporting Countries is running very low.
By 02:00 AM ET, U.S. crude futures traded 0.4% higher at $96.16 a barrel, but still down over 8% on the week, while the Brent contract rose 0.7% to $99.76, over 6% lower on the week.
Additionally, gold futures edged up to $1,706.00/oz, while EUR/USD edged higher at 1.0018.