European Stocks Higher; German Factory Orders Highlight Economic Risks

By Peter Nurse 

Investing.com - European stock markets traded higher Friday, with the momentum generated by a positive tone in Asia on China reopening speculation overshadowing weak German factory orders.

At 04:40 ET (08:40 GMT), the DAX futures contract in Germany traded 0.7% higher, CAC 40 futures in France climbed 0.8% and the FTSE 100 futures contract in the U.K. rose 0.7%.

European equities received a boost from the strong gains in Asia Friday on renewed speculation over an imminent relaxation of China's COVID-19 curbs, potentially lifting economic activity in the world’s second largest economy and a major European export market.

The Hang Seng index in Hong Kong closed over 5% higher, while China’s blue-chip Shanghai Shenzhen CSI 300 index surged 3.2% and the Shanghai Composite index jumped 2.6%, both trading around three-week highs.

Such a change would be positive for the global economy, a boost that is especially needed in Europe as a slump in German factory orders suggested the Eurozone’s largest economy is rapidly heading towards recession.

New data showed orders to the key German manufacturing sector slumping by an alarming 4.0%, their sixth decline in the last seven months and the biggest decline since March. 

Services activity data for the Eurozone are due later in the session, and are expected to show this sector remains firmly in contraction territory. 

The day’s key data release, however, will be the U.S. payrolls report, which is expected to show that nonfarm payrolls increased by 200,000 jobs in October. An upside surprise could cement another hefty Fed hike in December.

In the corporate sector, Societe Generale SA (EPA:SOGN) stock rose 4.2% after France's third-biggest listed bank joined European rivals in posting a higher-than-expected net income in the third quarter as market volatility boosted trading revenues.

Telefonica (BME:TEF) stock rose 1.9% after the Spanish telecom operator reiterated its full-year financial guidance and dividend commitments despite facing headwinds from soaring inflation and slowing economic growth.

Oil prices rose Friday, helped by an easing dollar and fresh rumors that China plans to scale back COVID-related restrictions, while traders await news on the potential passing of a price cap on Russian exports, a plan aimed at squeezing funding to Moscow without cutting supply to consumers. 

Reuters reported, late Thursday, that the G7 nations, and Australia, have agreed to set a fixed price when they finalize a price cap on Russian oil later this month, rather than adopting a floating rate.

By 04:40 ET, U.S. crude futures traded 2.2% higher at $90.13 a barrel, while the Brent contract rose 2% to $96.56. 

Both benchmarks are on course to post a positive week, with supply seen as tight, illustrated by falling U.S. crude stockpiles, even as recession fears raise demand concerns.

Additionally, gold futures rose 1.2% to $1,649.80/oz, while EUR/USD traded 0.3% higher at 0.9778.