European stock futures edge higher; weak Chinese inflation limits gains

© Reuters.

Investing.com - European stock markets are expected to open with small gains Friday, helped by the rally on Wall Street overnight after weak U.S. employment data boosted expectations of a more dovish slant by the Federal Reserve next week.

At 02:00 ET (06:00 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%.

Europe set to follow Asia, U.S. higher

Equities on Wall Street closed higher Thursday, with the broad-based S&P 500 index ending at a new high for the year, after applications for U.S. unemployment benefits jumped last week to the highest level since October 2021.

Investors have taken this sign of weakness in the U.S. labor market as boosting the chances of the Federal Reserve skipping a rate hike next week, lessening the monetary pressure on the U.S. economy.

Equities in Asia climbed in response to the gains on Wall Street, and European stocks are expected to follow suit.

Weak Chinese inflation data to limit European gains

However, gains are likely to be limited Friday after data released earlier in the session showed that Chinese consumer inflation contracted in May from the prior month, while factory gate inflation sank at its fastest pace in seven years.

This weak inflation data raised further questions over a slowing economic recovery in the country, the major growth driver in the region as well as a vital export major for many of Europe’s senior companies. 

ECB to hike next week

While there are doubts about what the Fed will announce next week, the European Central Bank’s next move is more certain, with a quarter-point increase fully priced for Thursday.

The only real uncertainty is when the next quarter-point increase will come, i.e. will the ECB take the summer off to re-evaluate?

ECB President Christine Lagarde said on Monday it was too early to call a peak in core inflation, and a clear majority of economists polled by Reuters expects another hike of 25 basis points in July.

ECB Vice President Luis de Guindos is due to speak at an event in Madrid later in the session, while Italian industrial production data for April could also provide guidance.

Dassault Systemes targets doubling of earnings

Dassault Systemes (EPA:DAST) will be in the spotlight Friday after the French software provider announced it was targeting a doubling of its earnings per share by 2028.

It also announced that Pascal Daloz will become its new CEO at the start of next year.

Oil slips after weak Chinese data

Oil prices fell Friday after dismal inflation data from China raised fears that slowing economic growth at the world’s largest crude importer will hit demand growth this year.

By 02:00 ET, U.S. crude futures traded 0.8% lower at $70.71 a barrel, while the Brent contract dropped 0.8% to $75.33. 

Additionally, gold futures rose 0.1% to $1,980.15/oz, while EUR/USD traded 0.1% lower at 1.0779.