Europe midday: Shares go red as ECB frets over inflation; Eyes on US data

(Sharecast News) - European shares were lower on Friday after hitting record highs in the previous session after the European central Bank cut interest rates with attention turning to key US jobs data. The pan-European Stoxx 600 index was down 0.38% to 522.42 in early deals. The ECB on Thursday lowered interest rates for the first time in five years but gave away little in the way of timings for the next cut and lifted some forecasts for growth and inflation. Canada cut rates on Wednesday, joining Sweden and Switzerland which had already moved on policy.

"European markets are in the red, following yesterday's ECB meeting that can be filed under a hawkish cut. The ECB expectations that inflation will remain above target for both 2024 and 2025 highlights the potential concerns around just how long this easing phase will last," said Scope Markets analyst Joshua Mahony.

Eyes now turn to US job numbers where growth is expected to have maintained its moderate pace last month, while wage gains were seen holding steady.

"Recent economic data, especially within the labour market, has shown signs of stalling, which adds particular significance to today's non-farm payrolls number," said Interactive Investor head of markets Richard Hunter.

"The readings have tended to confound expectations of late, and whatever the result, the number will likely move the market. A significantly lower figure than expected could reignite concerns of a hard landing, whereas a particularly strong number would play to the narrative of the Fed's previous assumption that rates would remain higher for longer and likely beyond September."

In economic news, German exports rose by 1.6% in April compared with the previous month, the second straight month of gains, and better than forecasts of a 1.1% rise.

The monthly gains were driven by exports to China, up 0.8% to €8.4bn, and the UK, up 15.4% to €7.4bn.

Imports gained 1.9% month-on-month.

Final estimates for first-quarter economic and jobs data in the eurozone were in line with preliminary estimates on Friday, with both showing a moderate expansion on the preceding three months.

Gross domestic product growth was unrevised at 0.3% over the first three months of the 2024, meeting market forecasts and showing a rebound from the 0.1% contraction registered in the fourth quarter of 2023.

The German economy is gaining momentum after two years of weakness, the Bundesbank said on Friday, despite "stubborn" inflation.

Publishing its latest forecast for Germany, the central bank said the economy was "slowly regaining its footing" after a two-year period of weakness.

It forecast calendar-adjusted GDP of just 0.3% this year, but expects it to rise to 1.1% in 2025 and 1.4% in 2026.

Reporting by Frank Prenesti for Sharecast.com