European stock markets commenced the new month on an upward trajectory, buoyed by optimism that the European Central Bank (ECB) has concluded its rate-hiking cycle. As of 03:05 ET (08:05 GMT), key indices reflected positive gains, with Germany’s DAX rising by 0.6%, France’s CAC 40 by 0.7%, and the U.K.’s FTSE 100 by 0.5%.
The positive momentum in November, marking the best month since January, was fueled by easing inflation, igniting speculation that the ECB would refrain from aggressive rate hikes. This sentiment gained further traction following Thursday’s data revealing a drop in Eurozone inflation to 2.4% in November, down from 2.9% in October and below expectations.
ECB officials, cautious about quelling expectations of rate cuts in the coming year, received added support from Fabio Panetta, the new governor of the Bank of Italy and an ECB governing council member. Panetta emphasized that the ECB should avoid causing “unnecessary damage” to the economy and financial stability through prolonged high-interest rates.
Investors are keenly awaiting remarks from ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell, anticipating insights into future monetary policies.
Later in the session, attention turns to Eurozone manufacturing activity data, expected to confirm the sector’s continued contraction in November.
Positive Indicators Extend with Chinese Manufacturing Rebound
Adding to the positive market sentiment, a private survey revealed an unexpected rebound in Chinese manufacturing activity in November. The Caixin/S&P Global manufacturing purchasing managers’ index rose to 50.7, exceeding the 50 mark that separates growth from contraction. However, this optimistic reading contrasts with an official survey the previous day, indicating contraction in both manufacturing and non-manufacturing activities, signaling challenges in the world’s second-largest economy and a significant export market for European companies.
Oil Prices Retreat on OPEC+ Output Reduction Falling Short
Oil prices experienced a decline, following the previous session’s losses, as voluntary output cuts agreed upon by OPEC+ producers fell short of expectations. U.S. crude futures were down 0.1% at $75.87 a barrel, while the Brent contract dropped 0.2% to $80.71 a barrel by 03:05 ET. The OPEC+ group agreed to a voluntary output reduction of 900,000 barrels per day, coupled with extending existing production cuts, aiming to counter a crude oil surplus in Q1 2024. However, the market remains cautious as supplies may be less constrained than initially anticipated.
In other markets, gold futures rose 0.2% to $2,041.60/oz, and the EUR/USD traded 0.1% higher at 1.0898, indicating a mixed yet cautiously optimistic sentiment in the global financial landscape.