Category: Top Story

European equity markets extended their record-setting advance on Thursday after weaker U.S. labour market data eased concerns over further near-term Federal Reserve interest rate increases, boosting investor confidence across the region.

The pan-European STOXX 600 gained 0.5% in early trading, reaching another all-time high after also finishing at a record level in the previous session.

Global risk appetite improved following a sharp slowdown in U.S. job creation. The softer employment figures helped calm concerns that sustained monetary tightening in the United States could further weigh on economic growth across Europe.

A less aggressive Federal Reserve outlook is viewed as supportive for European assets because it reduces pressure on global borrowing costs, limits capital flows toward higher-yielding U.S. assets and gives the European Central Bank greater flexibility in managing its own monetary policy.

Before the employment figures were released, traders had assigned more than a 60% probability to another Fed rate increase at the September meeting, according to CME FedWatch data. Those expectations had strengthened after recent comments from newly appointed Federal Reserve Chair Kevin Warsh. Following the payroll report, however, markets shifted their outlook, increasingly expecting policymakers to leave rates unchanged until at least October.

ECB comments add further support

Investor sentiment also benefited from remarks delivered during the European Central Bank’s annual forum in Sintra, Portugal.

ECB President Christine Lagarde said that risks to euro area inflation and economic growth are becoming “more broadly balanced,” providing reassurance after last month’s 25-basis-point interest rate increase.

The comments reinforced expectations that the ECB can continue managing its own policy path without being forced to closely mirror future Federal Reserve decisions.

European equities head for strongest week in months

The STOXX 600 remained on track to record its strongest weekly performance in almost two months.

Market sentiment was also strengthened by further progress in negotiations between the United States and Iran.

The improving geopolitical backdrop contributed to oil prices retreating toward pre-conflict levels while shipping activity continued to normalise, easing inflation pressures on European supply chains.

Across the region, Germany’s DAX advanced 0.9% to another record high, France’s CAC 40 rose 0.3%, Italy’s FTSE MIB added 0.5%, and London’s commodity-focused FTSE 100 gained 0.3%.

Among individual companies, Pirelli (BIT:PIRC) climbed 2% following reports that Czech investors are interested in acquiring part of Sinochem’s stake, while Auto1 Group (TG:AG1) gained 2% after J.P. Morgan added the shares to its positive catalyst watch list.

UK equities moved higher on Friday after weaker-than-expected U.S. labour market data reinforced expectations that the Federal Reserve could take a less aggressive approach to interest rates. With U.S. markets closed for the Independence Day holiday, lighter trading volumes were also expected to increase volatility during the European afternoon.

The FTSE 100 gained 0.29% by 03:23 ET (07:23 GMT). Germany’s DAX rose 0.75%, while France’s CAC 40 added 0.30%. Sterling strengthened 0.16% against the U.S. dollar to $1.3367. U.S. exchanges remained closed for the holiday, leaving European markets with reduced liquidity.

The U.S. economy created 57,000 nonfarm payroll jobs in June, well below economists’ expectations of 113,000. Employment figures for April and May were also revised lower, reinforcing signs of a cooling labour market.

Although the unemployment rate edged down to 4.2%, the decline was largely attributed to lower labour force participation rather than stronger hiring. Meanwhile, wage growth matched market forecasts.

Negotiations between the United States and Iran have been temporarily suspended ahead of the state funeral of former Supreme Leader Ayatollah Ali Khamenei, whose body arrived at Tehran’s Grand Mosalla complex early on Friday.

Official ceremonies are due to run from 4 July through 9 July, with Iranian officials expecting between 15 million and 20 million mourners to attend.

Mediators from Qatar and Pakistan said discussions would resume “at the earliest possible time” once the commemorations have concluded. Iran’s Revolutionary Guard leadership also warned the U.S. and Israel against carrying out military action during the funeral procession, while Washington confirmed that a second Marine unit of more than 2,000 personnel has been deployed to the region.

Shipping activity through the Strait of Hormuz continued to recover, reaching at least 258 vessel movements last week compared with 138 the previous week. However, traffic remains well below pre-conflict levels of around 130 ships per day.

Prime minister-in-waiting Andy Burnham told LBC’s Andrew Marr that he would increase business rates on large out-of-town warehouses to help finance a 20% reduction in business rates for high street retailers.

“I believe there is a case for higher business rates on warehouses,” he said, adding that he remained committed to Labour’s 2024 manifesto pledges on income tax, VAT and national insurance. Burnham also declined to identify his preferred chancellor before his expected confirmation on 20 July.

In commodity markets, Brent crude rose 0.32% to $72.03 per barrel, while WTI crude gained 0.10% to $68.76. Gold prices climbed sharply as the weaker dollar boosted demand, with gold futures rising 1.39% to $4,183.65 an ounce and spot gold advancing 1.13% to $4,170.36.

U.S. stock futures traded lower on Thursday as investors awaited the release of the June non-farm payrolls report, a key economic indicator that could shape expectations for Federal Reserve policy. Falling oil prices and renewed weakness in semiconductor shares also weighed on market sentiment during the final trading session of the holiday-shortened week.

Wall Street futures retreat ahead of key data

As of 07:13 GMT, Dow Jones futures were down 95 points, or 0.2%, while S&P 500 futures fell 22 points, or 0.3%. Nasdaq 100 futures underperformed, dropping 250 points, or 0.8%.

The previous session saw U.S. markets finish lower after semiconductor stocks came under renewed pressure. Reports that Meta Platforms is exploring ways to commercialise excess AI computing capacity added to concerns that demand for new chips could moderate.

Federal Reserve Chair Kevin Warsh acknowledged that inflation risks have eased but maintained that it was too early to provide guidance on future interest rate decisions. Softer-than-expected private employment and manufacturing figures also prompted investors to reduce expectations of a near-term rate increase.

Labour market figures could reshape Fed expectations

The June non-farm payrolls report is expected to show that the U.S. economy added 114,000 jobs, down from 172,000 in May, while the unemployment rate is forecast to remain at 4.3%.

Recent payroll reports have consistently exceeded expectations, reinforcing confidence in the labour market. However, weaker private-sector employment data released earlier this week has raised doubts about whether the Federal Reserve will need to tighten monetary policy further this year.

Crude prices decline as diplomacy continues

Oil prices continued to move lower after officials reported constructive progress in indirect negotiations between the United States and Iran.

Although no agreement has yet been reached, comments from Qatar, President Donald Trump and Vice President JD Vance suggested discussions remain active, easing concerns over supply disruptions through the Strait of Hormuz.

According to Deutsche Bank, “[T]he newsflow helped to bring oil prices down and ease investor concern about inflation.”

Semiconductor sector under renewed pressure

Technology shares across Asia weakened after reports suggested OpenAI had significantly improved the efficiency of its AI models, reducing demand for graphics processors, while Meta is evaluating a cloud platform offering spare AI computing capacity.

The developments weighed on major chipmakers including Samsung Electronics, SK Hynix, Advantest, Tokyo Electron and Taiwan Semiconductor Manufacturing Co.

U.S. set to introduce voluntary AI standards

The Financial Times reported that the Trump administration may unveil voluntary guidelines for advanced artificial intelligence models as early as next week.

The proposed framework would establish common benchmarks for evaluating frontier AI systems before launch, replacing the current case-by-case regulatory approach.

European equity markets were little changed on Thursday as investors weighed cautious comments from leading central bankers against regional economic data while awaiting the release of a closely watched U.S. employment report.

The pan-European STOXX 600 hovered around 638.66 points in early trading after ending the previous session at its third-highest closing level on record. The benchmark gained more than 10% over the previous quarter.

Trading across the region was subdued. Germany’s DAX slipped 0.2%, France’s CAC 40 added 0.3%, London’s FTSE 100 eased 0.1%, while Italy’s FTSE MIB traded broadly flat.

Europe avoids technology-led sell-off

Although technology stocks came under renewed pressure across Asian markets overnight, European equities proved relatively resilient.

The region’s lower exposure to the world’s largest technology companies compared with U.S. and Asian markets helped cushion European indices from the latest weakness in the sector.

However, that defensive positioning also meant European markets captured less of the powerful artificial intelligence-driven rally that propelled global equities to record highs during the previous quarter.

Sintra comments reinforce cautious rate outlook

Investor sentiment remained restrained following comments from policymakers attending the European Central Bank’s annual forum in Sintra, Portugal.

Federal Reserve officials and ECB President Christine Lagarde indicated that while inflation risks are becoming more balanced, it remains too early to expect a rapid shift towards more accommodative monetary policy.

Lloyds Bank analysts said, “The ECB has retained a cautious approach as fears of ‘second-round’ effects linger.”

They added, “The market is pricing for another 25-basis-point hike by September, then an extended hold through to the middle of next year, pushing back against a more inflationary scenario.”

U.S. jobs report remains the key focus

Attention has now turned to the U.S. non-farm payrolls report, which is expected to provide fresh direction for global financial markets.

Economists forecast that around 100,000 jobs were created in June. Investors will scrutinise the figures for clues about the Federal Reserve’s next policy moves and whether expectations for up to two interest rate cuts by the end of the year remain justified.

Sodexo leads gainers

Among individual stocks, Sodexo (EU:SW) climbed more than 7% after reporting stronger-than-expected third-quarter revenue and raising its full-year sales guidance.

FTSE 100 opens little changed as Currys posts stronger profits and Wizz Air reports passenger growth while Brent crude prices ease.

Market Overview

UK markets opened little changed, with the FTSE 100 edging 0.01 per cent lower to 10,477.76, while the Euronext 100 also slipped 0.01 per cent. Germany’s DAX outperformed, rising 0.25 per cent to 25,102.51. Overnight, the Nasdaq closed lower at 26,040.03 and the S&P 500 finished at 7,483.23. Investors weighed dovish interest rate signals against cautious European sentiment, while lower oil prices reflected improving US-Iran talks and expectations of ample crude supply.

Against sterling, the US dollar, euro and Australian dollar strengthened slightly, while the Swiss franc and Japanese yen weakened. Bitcoin advanced slightly. In commodities, copper and gold traded lower, Brent crude declined as easing geopolitical concerns weighed on prices, and natural gas also moved lower.

Market Numbers

FTSE 100: Down (-0.01%), 10,477.76
Euronext 100: Down (-0.01%), 1,906.08
DAX: Up (+0.25%), 25,102.51
NASDAQ: Down, 26,040.03
S&P 500: Down, 7,483.23

In the Headlines

Profit Growth – Currys (LSE:CURY)
Currys reported higher annual profits and increased shareholder returns, supported by a strong performance from its Nordic operations. The results underline improving operational momentum and provide a positive signal for investors following a period of restructuring.

Traffic Growth – Wizz Air (LSE:WIZZ)
Wizz Air reported 27 per cent growth in June passenger numbers and confirmed the rollout of Starlink in-flight Wi-Fi across its fleet. The update highlights continued demand strength alongside investment in customer experience.

Currencies (vs GBP)

USD: Up (+0.01%), $1.3278
CHF: Down (-0.03%), Fr.1.0745
EUR: Up (+0.01%), €1.1671
JPY: Down (-0.02%), ¥215.8345
AUD: Up (+0.01%), $1.9270
Bitcoin (BTC/GBP): Up, £45,086.66

Commodities

Copper: Down
Gold: Down
Brent Crude: Down
Natural Gas: Down

The FTSE 100 moved higher on Thursday after early losses faded, with investor sentiment supported by dovish comments from leading central bankers at the ECB Forum on Central Banking in Sintra. The more supportive monetary policy outlook helped offset pressure from falling oil prices as optimism grew over progress in talks between the United States and Iran.

By 07:23 GMT, the FTSE 100 was up 0.14%, while Germany’s DAX gained 0.09% and France’s CAC 40 advanced 0.50%. Sterling strengthened 0.28% against the U.S. dollar to 1.3314.

Central bank comments lift market sentiment

Comments from policymakers helped improve investor confidence after senior officials signalled that interest rates may remain on hold.

Federal Reserve Governor Kevin Warsh, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey all adopted a more accommodative tone during a panel discussion in Sintra. Jefferies strategist Mohit Kumar described Bailey as “probably the most clear,” arguing the UK is experiencing a “soft patch” where higher mortgage rates have “effectively tightened” monetary policy without the need for further interest rate increases.

Lagarde also pointed to the sharp fall in energy prices, noting oil “was at $120 a few weeks ago and is now close to $70.”

Jefferies said the discussion “supports our view of no (further) hikes this year from the Fed, ECB or BoE.”

Oil prices fall as Iran talks make progress

Energy markets remained under pressure after fresh signs of diplomatic progress between Washington and Tehran.

Iran’s Deputy Foreign Minister Kazem Gharibabadi criticised a U.S.-led regional security summit in Bahrain, writing on X that “Hormuz is defined under Iran’s command, not CENTCOM” and that a military summit “cannot establish legal order and security for the Persian Gulf.”

Meanwhile, Qatar and Pakistan said in a joint statement that “positive progress was made” during indirect talks in Doha between U.S. and Iranian officials, with further negotiations expected after the funeral processions for Iran’s former Supreme Leader.

U.S. President Donald Trump told reporters that “the denuclearization of Iran is moving along well” and described the Doha discussions as “very good.” Vice President JD Vance also said “talks are going well,” while noting that negotiations over Iran’s nuclear programme were still at an early stage.

Brent crude declined 1.23% to $70.69 a barrel, while WTI crude fell 1.3% to $67.69. Gold futures slipped 0.20% to $4,074.67 an ounce, although spot gold rose 0.76% to $4,062.08.

Chip stocks pressured by Meta AI plans

Jefferies also noted that semiconductor shares came under pressure after reports that Meta plans to monetise excess artificial intelligence computing capacity through a cloud offering.

The development weighed on Asian technology stocks overnight, with South Korea’s KOSPI among the weakest-performing major indices.

Currys gains after strong annual results

Among UK-listed companies, Currys (LSE:CURY) traded higher after reporting an 18% increase in annual profit and saying trading had started strongly in the new financial year, supported by sales growth across both its UK and Nordic businesses.