European stocks weaken; U.K. GDP grows slightly more than expected

Investing.com - European stock markets retreated Friday, with better-than-expected U.K. growth data unable to overcome the unease generated by the rise in U.S. inflation.

At 03:40 ET (07:40 GMT), the DAX index in Germany traded 0.3% lower, the CAC 40 in France dropped 0.5% and the FTSE 100 in the U.K. fell 0.7%.

The main European indices recorded strong gains on Thursday, but are handing back some of these advances as the week nears its end and investors digest the latest U.S. inflation data.

Although the U.S. CPI grew as expected in July from the prior month, boosting expectations that the Federal Reserve will keep rates unchanged in September, it remained substantially above the central bank’s medium-term target, implying rate cuts are still some way off.

U.K. GDP climbs in second quarter 

While the Fed could pause next month, the Bank of England is seen continuing to tighten monetary policy with U.K. inflation among the highest in the developed world.

That said, U.K. gross domestic product rose slightly more than expected in the second quarter, climbing 0.2% on the quarter and 0.4% on an annual basis, rising 0.5% in June alone.

Although Britain's economy did eke out unexpected growth in the second quarter, it remained the only big advanced economy yet to regain its pre-COVID, late-2019 level.

Elsewhere, the French unemployment rate rose to 7.2% in the second quarter, up from 7.1% the prior quarter, while French and Spanish inflation climbed in July, adding to the uncertainty surrounding future central bank interest rate decisions.

Across the pond, Fed policymakers will have another inflation reading to digest in the form of the producer price index, as well as consumer confidence data.

UBS terminates Credit Suisse takeover backstop

The quarterly earnings season is starting to ease down, with a few tier-one companies scheduled to report earnings Friday.

UBS (SIX:UBSG) stock rose over 4% after Switzerland's biggest lender said Friday it will not need to take advantage of the Swiss government's over $10 billion backstop agreed as part of the state-sponsored takeover of Credit Suisse, having repaid billions of Swiss francs in emergency loans.

Crude largely flat; OPEC retains oil demand growth forecasts

Oil prices steadied Friday, with traders trying to digest U.S. inflation data, concerns about a stuttering economic recovery in China, the world’s largest oil importer, as well as optimistic demand forecasts from OPEC.

Thursday’s U.S. CPI release saw the dollar climbing, hurting the crude market as it makes the commodity more expensive for buyers holding foreign currencies.

Growing concerns over China’s economy also weighed on oil markets, but this was counterbalanced by the Organization of the Petroleum Exporting Countries confirming on Thursday that it still expects world oil demand to rise by 2.25 million barrels per day in 2024, compared with growth of 2.44 million barrels per day this year.

By 03:40 ET, the U.S. crude futures traded 0.3% higher at $83.05 a barrel, while the Brent contract climbed 0.3% to $86.62. 

Additionally, gold futures edged higher to $1,949.35/oz, while EUR/USD traded 0.2% higher at 1.0999.