European Markets: Cautious Trading Ahead of U.S. Inflation Data

European stock markets exhibited a lackluster performance on Thursday, as investors adopted a cautious stance ahead of the anticipated release of key U.S. inflation figures.

At 03:05 ET (07:05 GMT), the DAX index in Germany was down 0.1%, while France’s CAC 40 fell by 0.2%. In contrast, the FTSE 100 in the U.K. rose 0.2%.

European Markets Look to U.S. Inflation and China

Traders in Europe were on edge due to the upcoming U.S. inflation data, which could affect expectations surrounding Federal Reserve interest rate cuts. The previous week’s strong payroll report led to reduced expectations for significant rate cuts from the Fed, and persistent inflation could further challenge these expectations.

On a more positive note, the People’s Bank of China announced a liquidity support package worth 500 billion yuan for capital markets. Additionally, the Chinese finance ministry plans to provide updates on fiscal stimulus efforts this Saturday, aimed at bolstering economic growth.

Despite this, Chinese economic struggles, including sluggish consumer spending and a real estate crisis, weigh heavily, especially since China is a key export market for major European companies.

Germany Downgrades 2024 Growth Forecast

In Germany, retail sales witnessed a monthly rise of 1.6% in August, a slight increase from 1.5% the previous month. However, the German government has downgraded its 2024 growth forecast. Economy Minister Robert Habeck indicated that Germany's GDP is expected to shrink by 0.2% this year, contrasting with a previous forecast of 0.3% growth. This prediction suggests Germany could face its first back-to-back recession in nearly two decades. The European Central Bank is set to meet next week and is anticipated to further ease its policy after already cutting rates twice this year.

Givaudan Impresses with Q3 Sales

On the corporate front, Swiss fragrance and flavor manufacturer Givaudan (SIX:GIVN) reported third-quarter sales that exceeded expectations, driven by sustained high demand in its markets. While the broader European chemicals sector, particularly in Germany, faces weak demand amid an economic slowdown, fragrance and flavor companies are experiencing strong sales growth.

Crude Gains as Hurricane Milton Lands

Oil prices rose on Thursday due to Hurricane Milton impacting Florida, raising concerns over potential supply disruptions in the Middle East. As of 03:05 ET, Brent crude was up 0.3% to $76.81 per barrel, while U.S. crude futures (WTI) increased by 0.4% to $73.51 per barrel. Both contracts have seen a decline of about 5% over the past two sessions.

The landfall of Hurricane Milton in Florida has heightened gasoline demand, supporting crude prices, although the storm largely missed critical oil infrastructure in the Gulf of Mexico. Moreover, traders are wary of possible escalation in Middle Eastern conflicts, particularly regarding threats to Iran's oil facilities. Recent EIA data indicated a rise in U.S. crude inventories by 5.8 million barrels, totaling 422.7 million barrels, which was greater than anticipated.