European stocks posted modest gains as investors awaited key US jobs data for clues on the Federal Reserve’s policy outlook.
(Bloomberg) — European stocks posted modest gains as investors awaited key US jobs data for clues on the Federal Reserve’s policy outlook.
The Stoxx Europe 600 Index rose 0.2% as of 9:23 a.m. in London, on track for its best weekly gain since mid-July. Energy stocks outperformed after Morgan Stanley double-upgraded the sector, while autos were laggards after UBS Group AG analysts cut their ratings on Renault SA and Volkswagen AG.
Among individual stocks, Aurubis AG plunged after being hit by a massive metal theft. Vestas Wind System A/S rose after it said it’s close to landing a large order to deliver turbines for a US onshore wind park.
Sentiment has been somewhat subdued this week after data showed a drop in China’s manufacturing activity for a fifth consecutive month. Meanwhile, euro-area inflation stopped slowing in August, presenting European Central Bank officials with a quandary as they weigh whether price pressures are too persistent to risk a pause in interest-rate hikes.
Focus later Friday will be on the US jobs report, where “it is essential that the number does not come too much lower than expectations if we don’t want the current market’s hesitation to become a genuine bear market,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management.
On the policy front in Europe, new forecasts will show that the ECB’s inflation outlook hasn’t changed much over the summer, even though prospects for the economy worsened, according to ECB Vice President Luis de Guindos.
The combination of weak economic data and sticky inflation is “a nightmare scenario for the ECB,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. The ECB should raise rates to continue fighting inflation, even though the underlying economies are under pressure, she added.
In China, the central bank said it will trim the amount of foreign currency deposits banks are required to hold as reserves for the first time this year to boost the yuan, in the latest efforts to shore up confidence.
Meanwhile, Morgan Stanley said European stocks offer the highest total yield globally as the region embraces buybacks like never before.
SECTORS IN FOCUS
- Watch European chip-equipment stocks as Samsung Electronics rallies on optimism that the Korean chipmaker will emerge as a key supplier of HBM3 memory chips for major clients including Nvidia.
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–With assistance from Farah Elbahrawy.
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