Euro zone inflation data, U.S. jobs report in focus

Euro zone inflation data, U.S. jobs report in focus

LONDON European markets climbed on Friday as investors digested key euro zone inflation data and December’s U.S. jobs report.

The pan-European Stoxx 600 index closed 1.1% higher provisionally, marking a 3.4% rise for the week — its best performance since mid-November.

All sectors were in the green. Basic resources led gains with a 2.5% rise, as chemicals and energy stocks both rose around 1.9%.

Inflation in the euro zone dropped for a second consecutive month in December. Headline inflation, which includes food and energy costs, came in at 9.2% year-on-year in December, according to preliminary data Friday from the European statistics agency, Eurostat.

It follows November’s headline inflation rate of 10.1%, which represented the first slight contraction in prices since June 2021.

Investors may be hoping that falling inflation will pave the way for the European Central Bank to temper its aggressive monetary policy tightening cycle and limit the continent’s economic pain. However, analysts do not expect a pivot from the ECB just yet.

Minutes from the last meeting of the U.S. Federal Reserve, published earlier this week, showed policymakers stateside were seemingly unmoved from their hawkish position as they look to bring inflation back down toward target.

Global stocks received a boost during afternoon trade in Europe when Friday’s U.S. nonfarm payrolls report showed payroll growth decelerated in December. The Dow Jones Industrial Average was up 1.07% shortly after the open.

Payroll growth still exceeded expectations, however — reinforcing the strength of the labor market despite the Fed’s attempt to tame inflation and suggesting there is room for higher interest rates.

Nonfarm payrolls increased by 223,000 for the month, above the Dow Jones estimate for 200,000, while the unemployment rate fell to 3.5%, 0.2 percentage point below expectations.

Shares in Asia-Pacific ticked higher overnight, led by South Korea’s Kospi index, while U.S. stock futures pointed to a positive open on Wall Street as traders await the key jobs report.

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