European Stocks Rise as Price Data Lift Rate Hopes: Markets Wrap

Catherine Bosley and Robert Brand

Fri, Aug 30, 2024, 3:17 PM3 min read

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(Bloomberg) -- European stocks are closing in on a fourth week of gains, lifted by the prospect of lower interest rates after inflation in some of the region’s biggest economies moderated further.

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The Stoxx Europe 600 index added 0.2% at the open, bringing its advance for the week to 1.4% and just shy of a record high. French inflation eased to its lowest level since July 2021 — bolstering the case for the European Central Bank to continue cutting interest rates after similar slowdowns in Germany and Spain. Aggregate data for the region is due later Friday.

US equity futures gained after a flat day on Wall Street, with Nvidia Corp.’s 6% drop weighing on stocks. Traders are awaiting the release of the Federal Reserve’s preferred inflation gauge later Friday.

Bets for a Fed rate cut continue to dominate global markets, after data showed that the central bank has managed to tame inflation without the economy tumbling into recession. US output grew at a slightly stronger pace in the second quarter than initially reported, reflecting an upward revision to consumer spending that more than offset weaker activity in other categories.

“The US economy looks like it’s moving from very strong to strong,” said Thomas Taw, BlackRock’s head of APAC investment strategy, told Bloomberg TV. “The data will continue to weaken, but you kind of have to marry that off with how much is inflation going to weaken in the US.”

Expectations for monetary easing have put Treasuries on course for their longest monthly winning streak in three years. But the wagers have weighed on the dollar, with a Bloomberg gauge of the currency set for its worst monthly performance this year. The dollar was steady on Friday.

Aside from the core PCE data due later in the session, the big focus for financial markets will be next week’s US employment numbers. Nonfarm payrolls figures on Sept. 6 will be scrutinized for clues as to whether the Fed will cut rates in September, after Chair Jerome Powell opened the door to easing at his Jackson Hole speech earlier this month.

US interest-rate cuts are likely to have knock-on effects for central banks the world over. In Asia analysts expect authorities in Indonesia and India to follow suit and potentially lower borrowing costs.

“The soothing Jackson Hole dovish messages continue to resonate, while focus turns to the US employment report to assess if a soft landing remains on track,” Barclays Plc analysts including Gabriel Casillas wrote in a note.

In the commodities space, gold edged lower while oil extended gains on positive US economic data and worsening supply disruptions in Libya. Iron ore edged higher after rallying by about 10% in 10 days to breach $100 a ton.

Key events this week:

Eurozone CPI, unemployment, Friday
US personal income, spending, PCE; consumer sentiment, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 8:14 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.4%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.7%
The MSCI Emerging Markets Index rose 0.5%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1076
The Japanese yen was little changed at 144.96 per dollar
The offshore yuan rose 0.1% to 7.0851 per dollar
The British pound was little changed at $1.3173

Cryptocurrencies

Bitcoin fell 0.2% to $59,416.42
Ether fell 0.4% to $2,530.18

Bonds

The yield on 10-year Treasuries was little changed at 3.86%
Germany’s 10-year yield declined one basis point to 2.26%
Britain’s 10-year yield declined one basis point to 4.00%

Commodities

Brent crude rose 0.3% to $80.21 a barrel
Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Winnie Zhu.