European Stocks Show Mixed Performance as US Inflation and Chinese Stimulus Take Center Stage

European stock markets experienced a subdued trading session on Thursday, as investors remained cautious ahead of the crucial US inflation data release.

As of 03:05 ET (07:05 GMT), Germany’s DAX index dropped by 0.1%, the CAC 40 in France decreased by 0.2%, while the FTSE 100 in the U.K. managed a modest gain of 0.2%.

European Markets Eye US Inflation and China

Market sentiment in Europe was cautious, with traders awaiting the US inflation figures scheduled for later in the day. The outcomes of this report could significantly impact expectations regarding potential interest rate cuts by the Federal Reserve.

Last week’s unexpectedly strong payroll figures led to traders recalibrating their forecasts for larger interest rate cuts from the Fed. If inflation shows signs of remaining stubbornly high, it could further diminish these cut expectations.

There was some encouraging news from Asia, where the People’s Bank of China announced a liquidity support initiative of 500 billion yuan for capital markets. Additionally, the Chinese finance ministry revealed that it would conduct a briefing on Saturday to discuss fiscal stimulus measures aimed at stimulating growth. This announcement follows a previous briefing on Tuesday that had largely disappointed investors.

China serves as a vital export market for many major European companies and is grappling with challenges, including sluggish consumer spending and a real estate crisis.

Germany Lowers 2024 Growth Forecast

In Europe, Germany reported a 1.6% increase in retail sales for August on a month-over-month basis, slightly better than the 1.5% gain from July. However, this positive news was overshadowed by the German government’s downgrade of its economic growth forecast for 2024. Economy Minister Robert Habeck indicated that the GDP in Europe’s largest economy is expected to contract by 0.2% this year, in contrast to an earlier forecast predicting a growth of 0.3%. This marks the nation’s anticipated first two-year recession in almost two decades.

The European Central Bank is set to convene next week, with expectations of another policy easing after already cutting rates two times this year.

Givaudan Reports Strong Q3 Sales

In corporate news, Swiss fragrance and flavor manufacturer Givaudan reported third-quarter sales that exceeded expectations, driven by consistent demand across its markets. While the wider European chemicals sector, particularly in Germany, is facing weak demand amid a sluggish economy, companies focused on fragrance and flavor have reported strong sales growth.

Oil Prices Rise Amid Hurricane Concerns

Oil prices saw an uptick on Thursday as Hurricane Milton impacted Florida, raising concerns over potential supply disruptions in the Middle East. By 03:05 ET, the price of Brent crude rose by 0.3% to $76.81 per barrel, while US crude futures (WTI) increased by 0.4% to $73.51 per barrel. Both contracts experienced a decline of around 5% over the previous two sessions.

Hurricane Milton has made landfall in Florida, and although the storm has largely bypassed the oil infrastructure in the Gulf of Mexico, it has still heightened gasoline demand in the state, supporting crude prices. Furthermore, market participants remain anxious about a possible escalation in tensions in the Middle East, particularly if Israel takes action against Iran’s oil facilities.

In other developments, data from the EIA on Wednesday indicated that US crude inventories surged by 5.8 million barrels to 422.7 million barrels last week, surpassing expectations.