European shares rose on Friday, following a rebound for beaten down Wall Street stocks overnight, as traders balanced more evidence of a Chinese economic slowdown with hopes that red-hot US inflation is easing.
Europe’s regional Stoxx 600 share index climbed 0.6 per cent in early dealings, while London’s FTSE 100 edged up 0.1 per cent and Germany’s Xetra Dax gained 0.5 per cent.
S&P 500 futures fell 0.2 per cent after the US blue-chip share index rallied sharply in the previous session. Official data on Friday showed profits at Chinese industrial businesses fell at their fastest pace in two years in April, dropping 8.5 per cent from a year earlier, in response to stringent coronavirus lockdowns and high raw material prices.
Later on Friday, economists expect data to show that the rate of growth in the US core personal consumption expenditures price index, an inflation measure favoured by the Federal Reserve that strips out volatile food and energy costs, has started to decline. Analysts polled by FactSet forecast the core PCE index rose 4.9 per cent in April from the same month last year, down from a reading of 5.2 per cent in March.
Earlier this week, minutes from the Fed’s latest meeting suggested the central bank would increase its main interest rate by half a percentage point in June and July, although policymakers remained mindful of undermining a recovery in the jobs market.
Strong results from US retailers Macys and Dollar Tree had on Thursday lifted a market mood that had turned sharply pessimistic in recent days after consumer-facing businesses from Walmart to social media group Snap had warned on inflation and macroeconomic conditions.
A 2 per cent gain for the S&P 500 share index on Thursday also put the blue-chip index firmly on track to avoid its eighth consecutive week of losses, in what would have been its longest losing streak since 2001.
“The stock market, after sharp declines in recent weeks, is probably oversold in the short term thus suggesting that a rebound is due,” said Lara Mohtadi, analyst at Nordic bank SEB.
Equity strategists at JPMorgan added that “investor sentiment is already very negative and portfolios are defensively positioned for . . . a recessionary outcome.”
In Asia, Hong Kong’s Hang Seng share index climbed 2.1 per cent after Alibaba beat first-quarter earnings estimates. The ecommerce group’s shares jumped 11 per cent in Hong Kong trading.
The dollar index, which tracks the US currencies against six others, fell 0.1 per cent and was on track for a 1.3 per cent weekly loss, after hitting a two-decade high earlier this month.
In bond markets, the US 10-year Treasury yield dipped 0.01 percentage points lower to 2.75 per cent as the price of the haven asset held firm following a recent rally. Germany’s equivalent Bund yield moderated by the same amount to 0.98 per cent.
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