European stocks rose on Friday as investors took an optimistic view of a week of data releases that showed economies in Europe and the US were more robust than expected.
The region-wide Stoxx 600 was up 0.7 per cent while France’s Cac 40 climbed 0.8 per cent. Germany’s Dax gained 1.1 per cent and the UK’s FTSE 100 rose 0.3 per cent.
For much of February, investors were rattled by a series of stronger than forecast economic data points, which spurred fears that the key central banks will keep interest rates higher for longer to combat lingering inflation.
“Equity markets now look to be responding more to the brightening growth outlook, which means they are likely in a better place to absorb the prospect [further rate increases],” said analysts at Barclays.
Final European S&P composite purchasing managers‘ index data was revised down on Friday from 52.3 to 52. However, both readings still indicated an expansion in activity over the previous month.
“That adds to the sense that the data is improving and that the economic outlook in the eurozone has improved,” said Neil Shearing, group chief economist at Capital Economics. “But since it’s been revised down it will temper some optimism.”
Data from the US on Thursday showed jobless claims fell to 190,000 in the week ending February 25, fewer than the 195,000 predicted. Figures on Tuesday showed stronger than expected inflation data from France and Spain, two of the eurozone’s largest economies.
Markets were buoyed by comments from Atlanta Federal Reserve president Raphael Bostic, who favoured a “slow and steady” approach to raising rates but was open to supporting higher increases if economic data continues to be strong.
Futures contracts tracking the blue-chip S&P 500 climbed 0.3 per cent, and those tracking the tech-heavy Nasdaq rose 0.4 per cent, following Thursday’s rally on Wall Street.
A key indicator of inflation in the services sector, the US ISM non-manufacturing PMI will be released at 3pm UK time on Friday.
US Treasury yields slipped after hitting their highest level in years on Thursday. Two-year notes, which are more sensitive to monetary policy, fell 0.05 percentage points to 4.86 per cent after hitting 4.94 per cent, their highest since 2007, on Thursday. Ten-year notes fell 0.07 percentage points to 4 per cent. Yields on 10-year German government bonds fell 0.04 percentage points to 2.71 per cent.
The dollar index, which measures the greenback against six peer currencies, fell 0.3 per cent. The euro rose 0.2 per cent, while sterling was up 0.5 per cent against the greenback.
Brent crude oil and WTI, the US equivalent, were both down 0.5 per cent — at $84.32 and $77.81 per barrel respectively.
