European stocks edge higher ahead of fresh U.S. inflation data

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By Scott Kanowsky 

Investing.com -- European equities rallied on Friday, as investors looked ahead to fresh U.S. inflation numbers following the release of stronger-than-anticipated growth data for the world's largest economy.

At 04:50 EST (09:50 GMT), the regional Stoxx 600 rose 0.14%, the DAX index in Germany was 0.15% higher, the FTSE 100 in the U.K. gained 0.18%, and the CAC 40 in France moved up 0.22%.

Later in the session, traders will have an opportunity to look over the latest U.S. core personal consumption expenditure price index - the Federal Reserve's preferred measure of inflation. The reading, which removes volatile energy and food prices, is expected to tick up slightly to 0.3% in December.

This comes after Commerce Department figures released on Thursday showed that the U.S. expanded by 2.9% in the fourth quarter, down from 3.2% in the prior three-month period but above economists' estimates for growth of 2.6%. Hopes that this could prove to be a sign of U.S. economic resilience despite concerns over a potential recession triggered gains on Wall Street, which in turn spilled over into Asia.

Meanwhile, the number of Americans filing for unemployment insurance last week unexpectedly dropped, suggesting lingering tightness in the U.S. labor market.

Seasonally-adjusted initial jobless claims dipped to 186,000 in the week ending January 21 from an upwardly revised level of 192,000 in the prior week. Economists had predicted the figure would jump to 205,000. The rolling four-week average, which aims to adjust for volatility in the numbers, decreased by 9,250 to 197,500.

Analysts at ING argued that, following this batch of economic data, expectations are now firmly set around the Fed raising interest rates by a more modest 25 basis points when officials meet next week. The U.S. central bank aggressively increased borrowing costs throughout 2022 in a bid to tamp down demand and cool red-hot price growth.

"While inflation is still well above target and unemployment is at a cycle low, there are signs that the economy is responding to tighter monetary policy and the Fed will be cognizant of fears that hiking rates too hard and fast risks toppling the economy into recession," the ING analysts said in a note.

In corporate news, shares in H & M Hennes & Mauritz AB B (ST:HMb) slumped to their biggest intraday decline since May. The Swedish retailer posted lower-than-expected fourth-quarter gross margin following a rise in energy, freight and garment prices.

LVMH Moet Hennessy Louis Vuitton SE (EPA:LVMH) reported weak second-half profit margins, but analysts focused on hopes that the luxury fashion giant will receive a boost from the reopening of the Chinese economy after the lifting of strict COVID-19 rules. Shares rebounded from an initial fall to touch a new record high in early trading.

J Sainsbury PLC (LON:SBRY) jumped towards the top of the Stoxx 600 after the British supermarket chain confirmed that wholesale conglomerate Bestway Group had acquired a 3.45% stake in the company. Bestway said it may look to make further purchases of Sainsbury's shares as well.

Elsewhere, the expected recovery in China and the implications of the U.S. GDP data were key themes. By 04:50 ET, U.S. crude futures were 1.28% higher at $82.05 a barrel, while the Brent contract climbed 1.30% to $88.61 per barrel.

Additionally, gold futures edged down 0.24% to $1,925.30/oz and EUR/USD inched lower by 0.07% to 1.0881.