Key Points:
- European markets edged higher, with the DAX up 0.43%, CAC 40 up 0.71%, and FTSE 100 up 0.78%.
- Wall Street gains and potential rate cuts from the Federal Reserve influenced market sentiment.
- Political developments in the U.K. and France are in focus, with significant elections upcoming.
- Crude oil prices fell due to soft U.S. economic data and weak Chinese PMI figures, though supported by falling U.S. crude stockpiles.
European stock markets edged higher on Thursday, buoyed by overnight gains on Wall Street and investor focus on regional political developments. At 4:40 AM (ET), Germany’s DAX index was up 79.35 or 0.43% to 18,453.88, France’s CAC 40 rose 54.52 or 0.71% to 7,686.60, and the U.K.’s FTSE 100 climbed 63.60 or 0.78% to 8,234.72.
The European markets’ strength follows record highs on Wall Street, where the S&P 500 and the NASDAQ Composite posted gains in holiday-shortened trade. Weak labor and economic activity readings in the U.S. increased the likelihood that the Federal Reserve will cut interest rates by September. Last month, the European Central Bank (ECB) cut interest rates and hinted at more easing in the coming months, though it did not commit the timing of the next move.
Slovenia’s central bank governor, Bostjan Vasle, advised against rushing into another rate cut, citing risks that could derail eurozone disinflation. Conversely, Alfred Kammer, Director of the International Monetary Fund’s European Department, suggested that disinflation in the region remains on track, providing the ECB room to cut rates further.
In the U.K., investors are closely watching the general election, where the opposition Labour Party is expected to end the Conservative Party’s 14-year rule. Markets seem relatively calm about this potential change, with the Labour Party aiming to appear fiscally responsible and the Conservative Party’s economic management reputation suffering from years of political turbulence. France is also in focus with Sunday’s crucial legislative run-off vote. The far-right National Rally won the popular vote last weekend, leading to the possibility of either a National Rally-led government or a hung parliament.
Crude oil prices fell on Thursday, retreating from two-month highs as soft U.S. economic data raised concerns over long-term demand. By 04:40 ET, U.S. crude futures (WTI) were down 0.94% at $83.09 per barrel, while Brent crude dropped 0.87% to $86.58 per barrel.
The selloff was influenced by weak labor market and purchasing managers index indicators in the U.S., signaling a cooling economy. Additionally, PMI data from top importer China underwhelmed, raising concerns about the strength of its economic recovery. Despite these concerns, losses were limited by official data from the Energy Information Administration, showing that U.S. crude and fuel stockpiles fell more than expected last week.
