Investing.com - European stock markets traded lower Friday, adding to the previous session’s sharp losses, as signs of an economic slowdown added to concerns of rising interest rates ahead of the widely-watched U.S. payrolls release.
At 03:40 ET (07:40 GMT), the DAX index in Germany traded 0.2% lower, the CAC 40 in France fell 0.1%, while the FTSE 100 in the U.K. traded 0.4% lower.
German economy struggles to recover
German industrial production fell 0.2% on the month in May, indicating that the country's industrial sector, the region's economic powerhouse, continues to struggle despite a small increase the prior month.
The eurozone’s largest economy is having difficulty recovering from its recession earlier this year, with weak global demand from China weighing on the country’s manufacturing sector.
The Ifo institute’s index showed companies’ outlook in June deteriorated to the lowest seen in 2023, suggesting that a recovery may be slow to take hold.
Yet, despite these signs of economic weakness, the European Central Bank has signaled that another increase in interest rates later this month is virtually a done deal as it battles to get on top of elevated inflation.
U.S. labor market remains robust
Additionally, the U.S. Federal Reserve is likely to continue to tighten monetary policy after pausing its year-long rate hiking cycle in June, after data released Thursday showed that private payrolls grew far more than expected in June, rising by 497,000 jobs last month, up from a downwardly revised 267,000 in May.
At the same time, jobless claims for last week were largely as expected while there were a hefty 9.8 million job openings at the end of May.
These robust readings drummed up concerns that the Federal Reserve will act more aggressively in raising interest rates to curb inflation, and brings the closely watched employment report, due later Friday, firmly into the spotlight.
The release is expected to show nonfarm payrolls increased by 225,000 jobs last month after rising 339,000 in May and 294,000 in April.
Concerns that prolonged rate hikes will push the U.S. economy into recession continue to weigh heavily given the importance of the largest economy in the world as a global growth driver.
Shell signals weak gas trading
In corporate news, Shell (LON:SHEL) stock edged lower after the energy giant, Europe's largest oil and gas company, said it expects second-quarter trading at its gas division to be "significantly lower" compared with the previous quarter.
Airbus (EPA:AIR) stock rose 0.9% after the aircraft manufacturer recorded record demand from India, resulting in sharply increased orders in June, while bottler Coca Cola HBC (LON:CCH) raised its 2023 profit expectation on Friday, aided by robust sales and price increases in the first half of the year.
Oil climbs on drop in U.S. stockpiles
Oil prices rose Friday, on course for a second consecutive positive week following a larger-than-expected fall in U.S. oil stocks, suggesting resilient demand by the largest consumer of crude in the world.
Official data from the Energy Information Administration, released on Thursday, showed that U.S. inventories shrank by 1.5 million barrels, more than expected in the week to June 30, with a bigger-than-expected drop in gasoline inventories indicating improved fuel demand amid the travel-heavy summer season.
By 03:40 ET, the Brent contract climbed 0.7% to $77.03, while U.S. crude futures traded 0.7% higher at $72.31 a barrel. Both benchmarks were set to gain about 2% for the second straight week.
Additionally, gold futures rose 0.3% to $1,921.90/oz, while EUR/USD edged lower to 1.0886.