European markets will open slightly higher on Friday, as global markets ignore the sharp rise in US inflation, which many policymakers see as temporary.
According to IG data, Britain’s FTSE 100 will rise about 10 points to 7098, Germany’s DAX will rise about 28 points to 15,599, and the French CAC 40 is expected to arrive about 7 points to 6,553, according to IG data.
The Asia-Pacific markets were muted by overnight trading after the S&P 500 climbed to new all-time highs in the US on Thursday. US stock futures were unchanged in early trading on Friday ahead of the market.
The US Labor Department reported on Thursday a 5% annual increase in its core CPI, the fastest growth since 2008. Core inflation, excluding food and energy prices, rose 3.8%, reaching the sharpest rise in nearly three decades.
Investors are watching inflation figures closely to assess whether the US Federal Reserve will begin to scale back its unprecedented monetary stimulus program. Still, strategists suggested there was enough evidence in Thursday’s data to support the Fed’s claims that higher-than-expected inflation would be temporary.
“According to the findings, sectors that are rapidly recovering from the easing of restrictions on the pandemic continue to make significant contributions,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
“In addition, it is still clear that supply chain problems are affecting some sectors, with used car prices up 7.3% over the month. Figures such as today’s CPI will certainly puzzle the Fed, but the bottom line is that they will likely need more evidence to determine if upward inflationary pressures are more sustainable. “
A poll of economists released by Reuters on Thursday showed that most expect the Fed to announce a cutback in its massive bond buying program in August or September, with a decline in monthly purchases starting in early 2022.
Back in Europe, G-7 (Group of Seven) leaders are meeting on Friday in Cornwall, UK, with British Prime Minister Boris Johnson, who expects the world’s largest economies to agree to donate 1 billion doses of Covid-19 vaccine to developing countries.
According to an initial estimate released on Friday, UK GDP rose 2.3% mom in April, slightly above expectations. The Office for National Statistics said GDP remains 3.7% below its pre-pandemic level in February 2020, but is now 1.2% above its original peak of recovery in October 2020.
However, production volumes in industry, manufacturing and construction in April were significantly below expectations.
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