European stock futures flat; Eurozone inflation release looms large

© Reuters.

By Peter Nurse 

Investing.com - European stock markets are expected to open largely unchanged Friday, with investors digesting mixed Chinese activity ahead of the release of key inflation data on both sides of the Atlantic.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.1% higher, CAC 40 futures in France climbed 0.1%, while the FTSE 100 futures contract in the U.K. fell 0.1%. 

European equities are set to trade in a cautious manner as the week, month and first quarter come to a close, with investors seeking clarity over the strength of the recovery in China after the lifting of its COVID-19 restrictions as well interest rate outlooks in the U.S. and Europe.

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 grew 0.1% on the quarter in the final three months of last year, slightly better than expected, 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.

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) is likely to be in focus 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 02:00 ET, U.S. crude futures traded 0.2% lower at $74.23 a barrel, while the Brent contract dropped 0.3% to $78.36. 

Additionally, gold futures rose 0.1% to $1,997.80/oz, while EUR/USD traded 0.1% lower at 1.0890.