European markets were muted on Friday, as the U.S. Federal Reserve’s latest meeting minutes added to expectations that monetary policy tightening may slow down. This capped off an otherwise upbeat week for European markets.
The Stoxx 600 index was slightly higher in late morning trading, on track for its sixth consecutive weekly gain. Retail stocks were down 0.5%, while oil and gas stocks rose 0.8%.
The European blue chip index closed up 0.5% on Thursday, with a third straight session of gains taking it to a more than three-month high. This is the longest streak of gains for the index since February, and investors are hopeful that the momentum will continue.
The minutes from the Fed's November meeting showed that the central bank is seeing progress in its fight against high inflation and is looking to slow the pace of rate hikes. This is good news for those who are worried about the potential for rising interest rates to hurt the economy.
The minutes from the meeting stated that a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.
European investors were pleased with several economic data points that suggested a shallower recession than previously feared. This gave them hope that the worst of the economic downturn may be over.
Shares in Asia-Pacific were mostly lower on Friday, while U.S. markets were closed for Thanksgiving on Thursday. Stock futures inched higher in early premarket trade on Friday, however, as investors looked ahead to an early close.
According to Barclaycard Payments data, the volume of Black Friday card transactions is in line with 2021 levels. This is encouraging news for retailers, who have been struggling to keep up with demand during the pandemic.
The data covered purchases made through Barclaycard Payments up until 10 a.m. London time. Barclaycard Payments processes £1 out of every £3 spent on debit and credit cards in the U.K.
Investors are monitoring the annual shopping event closely to see how inflation and cost-of-living concerns are affecting consumer spending.
Germany's yield curve has reached its deepest level of inversion since 1992, according to Reuters. This means that short-term interest rates are higher than long-term rates, which is often seen as a sign of economic stress.
The gap between 2-year and 10-year government bond yields narrowed to 26 basis points on Friday.
Many economists believe that an inverted yield curve is a sign that a recession is coming.
Many analysts believe that Germany is heading for a recession, though Friday's final GDP reading for the third quarter showed 0.4% quarter-on-quarter and 1.3% annual growth, raising hopes that it will be shallow.
The Eurozone PMI figures for November showed a moderation in the slowdown of business activity, which has added to cautious optimism.
German GDP figures show that the country's economy has grown slightly more in the third quarter than anticipated, due to increased consumer spending.
The largest economy in Europe, Germany, grew by 0.4% in the second quarter compared to the previous quarter. On a year-on-year basis, the economy grew by 1.3%. These figures come from the Federal Statistics Office.
Although Germany is expected to enter a recession, the data suggests that it may not be as severe as first projected. This is good news for the country, as a more mild recession could mean a quicker recovery.
After a survey showed that U.K. first-time buyers increasingly favor rental properties, shares of British homebuilders Taylor Wimpey, Bellway and Persimmon all fell more than 2% in early trade.
At the top of the Stoxx 600, Danish mineral wool product manufacturer Rockwool International gained 4% after Morgan Stanley raised its price target for the stock. This is good news for the company, as a higher price target indicates that analysts believe the stock is undervalued and has potential for growth.
Britain's FTSE 100 is expected to open around 2 points higher at 7,467, while Germany's DAX is seen adding around 8 points to 14,548. France's CAC 40 is set to slip by around 6 points to 6,701.
According to Plurimi Wealth's chief investment officer, the U.K. commercial property sector is in a "toxic environment" for investors. This is due to the uncertain economic climate and the potential for further Brexit-related disruptions. As a result, many investors are choosing to avoid the sector altogether.
Patrick Armstrong, chief investment officer at Plurimi Wealth, believes that a margin squeeze is the biggest risk for equities. However, he thinks that some stocks could still perform well despite this trend.
He added that the best sectors and stocks are those with defendable margins or that are creating margin squeeze elsewhere.
Next year, global economic conditions are expected to change, which could cause different markets and sectors to underperform, according to the chief strategist of UBS Investment Bank.
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