Market Update: European Stocks Rise Amid Post-Fed Optimism

1. European Stock Markets Maintain Momentum

European stock markets extended gains on Friday, building on the post-Fed rally, despite more cautious stances from the European Central Bank (ECB) and the Bank of England (BOE). At 03:05 ET (08:05 GMT), the DAX index in Germany traded 0.4% higher, the CAC 40 in France rose 0.4%, and the FTSE 100 in the U.K. edged up 0.2%. The optimism persists in the wake of the Federal Reserve’s recent pivot towards rate cuts, with sentiment buoyed by hopes of a soft landing for the U.S. economy in 2024.

2. Central Banks Maintain Policy Tightness

While the ECB and BOE kept interest rates unchanged as expected, they reiterated plans to maintain tight monetary policies into the next year to address persistent inflation concerns. The ECB did not discuss policy easing during its two-day meeting, the BOE indicated that rates would stay high for an “extended period,” and Norway’s central bank even raised rates. This contrasts with the Fed’s dovish stance, contributing to the divergence in global central bank policies.

3. Economic Data and PMIs in Focus

Investors are closely watching economic data in Europe as the week concludes. French consumer prices for November, with an annual rise of 3.5%, are reported, along with Italy’s equivalent data. Additionally, December PMI data for France, Germany, the U.K., and the eurozone will provide insights into the region’s economic conditions. The figures are crucial for assessing the likelihood of a regional recession at the end of the year. Earlier, China reported positive industrial production growth, indicating resilience in its post-COVID economic recovery.

4. H&M Reports Sales Decline

In corporate news, H&M stock declined by 0.4% after the fashion retailer reported a 4% drop in sales for September-November, measured in local currencies. This marks the largest decline since Q3 2022. H&M faces increasing competition from Zara owner Inditex, which reported robust sales growth for the nine months through October. The contrasting performances highlight the challenges in the retail sector.

5. Oil Prices Set for Weekly Gain

Oil prices edged higher, poised for the first weekly gain in two months. Increased optimism about demand growth in 2024 and a weaker dollar contributed to the positive trend. U.S. crude futures traded 0.2% higher at $71.69 a barrel, and the Brent contract climbed 0.1% to $76.69 a barrel by 03:05 ET. Both benchmarks are on track for a 1% weekly gain, breaking a streak of seven consecutive weekly losses. The Federal Reserve’s signals of lower borrowing costs and improved oil demand forecasts from the International Energy Agency contributed to the positive sentiment.

6. Gold Futures and Currency Movements

Gold futures rose by 0.4% to $2,052.05/oz, benefiting from a weaker dollar and increased demand amid expectations of lower interest rates. The EUR/USD currency pair traded 0.1% higher at 1.0997. The dollar’s decline to a four-month low on the back of the Fed’s guidance supported gold prices, making dollar-denominated oil cheaper for foreign buyers.

This comprehensive update reflects the ongoing dynamics in European markets, influenced by central bank decisions, economic data, and corporate performance. Investors are navigating opportunities and challenges amid shifting global financial conditions.

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