European Shares Seen Opening Up On Fed Rate Cut Hopes

(RTTNews) - European stocks look set to open on a firm note on Friday as in-line U.S. inflation and weak labor market data bolstered bets for Federal Reserve interest-rate cuts.

Treasury yields pulled back, with the average rate on a 30-year U.S. mortgage falling to its lowest level in nearly a year, as investors factored in a 25-bps rate cut by the Federal Reserve to 4.00-4.25 percent next week.

Traders also ramped up bets for 125 bps of rate cuts over the next five FOMC meetings to support a deteriorating job market.

Closer home, the euro held below 1.1750 against the dollar ahead of German final inflation figures due later in the day.

Statistical office Destatis is forecast to confirm that consumer price inflation rose to 2.2 percent in August from 2.0 percent in July.

GDP and foreign trade data from the U.K. along with final inflation figures from France and Spain may also influence trading sentiment as the day progresses.

The U.S. economic calendar remains light, with trading later in the day likely to be impacted by reaction to the University of Michigan's preliminary report on consumer sentiment for September, which includes reading on consumers' inflation expectations.

Asian markets followed Wall Street higher, with benchmark indexes in South Korea and Hong Kong rising over 1 percent.

The dollar was on the back foot while gold edged up to trade around $3,655 an ounce amid mounting concerns over a weakening U.S. labor market.

Oil extended steep losses from the previous session as worries over weakening U.S. demand and a global supply glut overshadowed concerns about potential disruptions from the Middle East conflict and the war in Ukraine.

U.S. stocks surged overnight, with all three major averages closing at record levels, as a relatively tame CPI reading coupled with more signs of jobs cooling cemented expectations for coming cuts to interest rates.

Treasury yields fell as data showed jobless claims jumped last week to the highest level in almost four years, indicating layoff activity may be on the rise.

Separate data revealed the annual rate of consumer price growth accelerated to 2.9 percent in August from 2.7 percent in July, matching expectations as companies continued to push the cost of tariffs on to consumers.

The core CPI, which excludes energy and food costs, came in unchanged from the previous month at 3.1 percent.

The Dow jumped 1.4 percent, the S&P 500 climbed 0.9 percent and the tech-heavy Nasdaq Composite added 0.7 percent.

European stocks closed higher on Thursday as the European Central Bank held interest rates steady at 2 percent for the second consecutive meeting, lowered inflation forecasts and raised its 2025 GDP forecast.

The pan European STOXX 600 advanced 0.6 percent. The German DAX edged up by 0.3 percent, while France's CAC 40 and the U.K.'s FTSE 100 both gained by 0.8 percent.