European stocks edge higher; Eurozone inflation release due

By Peter Nurse

Investing.com - European stock markets edged cautiously higher Friday, with investors digesting mixed Chinese activity ahead of the release of key inflation data on both sides of the Atlantic.

At 03:40 ET (07:40 GMT), the DAX index in Germany traded flat, the CAC 40 in France climbed 0.1% and the FTSE 100 in the U.K. rose 0.1%.

Purchasing managers’ index data, released earlier Friday, showed that while Chinese service sector activity grew at its fastest pace in 12 years in March, manufacturing activity slowed from the prior month, pointing to an uneven recovery in Asia’s largest economy and a major export market for European companies.

Back in Europe, data showed the U.K. economy avoided recession last year, growing a revised 0.1% on the quarter in the final three months of last year, slightly better than than the flat figure earlier recorded, while German retail sales disappointed, falling 1.3% on the month in February.

However, it’s the Eurozone inflation data later in the day that will be in the spotlight. It is expected to show that annual CPI grew 7.1% in March, a reduction from the 8.5% growth the prior month.

There could be an upside to this figure though, judging from the stronger-than-expected German figures published on Thursday, although French inflation eased for the first time in three months, data showed Friday.

Markets have largely priced in another 50 basis points in hikes from the European Central Bank this year, and a hot inflation number is likely to cement this expectation.

Across the pond, the Fed's favorite gauge of inflation, core PCE price index, is due later in the session. This could provide clues as to the Federal Reserve's next move on interest rates, with the policymakers potentially having to tread carefully while the effects of fragile bank confidence roll through the economy.

In the corporate sector, Rio Tinto (LON:RIO) stock rose 0.3% after the world’s second-largest miner agreed to sell a majority stake in its La Granja copper project in Peru to First Quantum Minerals (TSX:FM) as it focuses on flagship developments in Mongolia and the U.S.

Oil prices traded in a subdued fashion Friday, as traders digested the mixed activity data out of China, the world’s largest crude importer, ahead of the U.S. inflation release.

Optimism surrounding China's economic recovery, and the associated boost to crude demand, has become a key determinant of prices this year, along with the extent of the Federal Reserve's hiking cycle and the impact upon economic activity in the U.S., the world’s largest consumer of energy.

By 03:40 ET, U.S. crude futures traded 0.5% lower at $74.01 a barrel, while the Brent contract dropped 0.7% to $78.09.

Additionally, gold futures fell 0.2% to $1,993.85/oz, while EUR/USD traded 0.1% higher at 1.0905.

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