European Stock Futures Sharply Higher; U.K. to Announce Tax U-Turn?

By Peter Nurse 

Investing.com - European stock markets are expected to open sharply higher Friday, continuing the global rebound as investors absorb the latest U.S. inflation data while speculation mounts that the U.K. government is set to abandon its plans for massive unfunded tax cuts.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 1.6% higher, CAC 40 futures in France climbed 1.6% and the FTSE 100 futures contract in the U.K. rose 0.9%.

U.S. stocks surged to finish more than 2% higher Thursday, reversing sharp falls, equities in Asia have followed suit and European equities are set to continue the positive tone despite another hot U.S. inflation reading.

Investors are clearly pricing in another leap-up in short-term borrowing costs from the Federal Reserve, but the gains in the global stock markets suggest fears that the inflation data was going to be even more substantial.

Back in Europe, market attention is squarely on whether the Bank of England will maintain some kind of support for the gilt market although it has said its emergency bond purchases are due to end on Friday.

Finance minister Kwasi Kwarteng cut short his trip to Washington and headed back to London late Thursday amid reports the U.K. government is preparing to abandon its package of unfunded tax cuts following weeks of chaos in financial markets.

In corporate news, TomTom (AS:TOM2) will be in the spotlight after the Dutch navigation and digital mapping company raised its 2022 outlook after better-than-expected third-quarter results driven by its location technology business.

Oil prices edged higher Friday, but still look set to post a weekly loss after a spike in China’s COVID-19 cases and a bigger-than-expected build in U.S. crude inventories increased concerns over global demand.

COVID cases persist in China, the world’s largest importer, including in Shanghai, the country’s financial capital, threatening new lockdowns, which could severely crimp demand. 

Additionally, official data from the U.S. Energy Information Administration showed that crude inventories grew by 9.9 million barrels last week, much more than expected.

However, oil prices were also supported by a steep drawdown in distillate stocks, falling 4.9 million barrels, as heating oil demand is expected to rise as winter approaches.

By 02:00 ET (06:00 GMT), U.S. crude futures traded 0.2% higher at $89.26 a barrel, while the Brent contract rose 0.1% to $94.69. Both contracts are down over 3% this week.

Additionally, gold futures fell 0.1% to $1,676.50/oz, while EUR/USD traded 0.1% higher at 0.9785.