- European equities trimmed some gains after the US NFP set a one-year high.
- Central bankers continue to weigh on investor rate cut hopes from all angles.
- BoE still sees inflation risks, Europe inflation figures continue to ease slower than expected.
European equity markets mixed on Friday with thin gains for most indexes while London’s FTSE index shed barely a tenth of a percent.
US Nonfarm Payrolls: surge 353,000 in January
US Nonfarm Payrolls surged to a twelve-month high on Friday, driving investors further away from rate cut expectations as the US economy remains stubbornly firm. Investors hoping for an accelerated pace of rate hikes from the US Federal Reserve (Fed) need the US domestic economy to show more weakness and further signs of an accelerating recession in order to push the US central bank into rate-trim territory.
Fed Chairman Jerome Powell threw markets a curveball this week when he all but directly ruled out a March rate cut, and the Bank of England (BoE) also remained fairly hawkish this week, albeit with a mixed vote on whether to cut or hike rates as the majority of BoE policymakers agree rates should just stay where they are for the time being.
European inflation this week also left investors grudgingly accepting the possibility of interest rates remaining where they are for the time being. Headline inflation eased in January, but core inflation fell less than expected and services sector inflation remained stubbornly steady.
The pan-European STOXX600 index rose a scant 0.02%, ending the week at €483.96 while France’s CAC40 gained 0.05%, climbing 3.5 points and closing Friday at €7,592.26.
Germany’s DAX index climbed a healthy 0.35%, gaining nearly 60 points and ending the week at €16,918.21. On the low side, London’s FTSE index shed nearly 7 points to end Friday down about a tenth of a percent at £7,615.54.
The DAX ended the week in the green, gaining a leg higher on Friday, but the major equity index saw another failed run at the €17,000.00 major handle. Near-term technical support sits at the 200-hour Simple Moving Average (SMA) near €16,750.00.
Daily candlesticks show a firm technical ceiling at €17,000.00, but the DAX index could see a fresh run into all-time highs if its able to maintain a bullish stance after a pullback to the 50-day SMA near €16,600.00.