European stock markets are expected to open marginally lower Friday, ending the week on a cautious note as investors digest central bank policy decisions ahead of the release of key U.S. employment data.
The Bank of England surprised investors on Thursday by keeping its interest rate steady, the day after the U.S. Federal Reserve indicated that it would be “patient” on interest rate hikes while beginning asset tapering.
Earlier in the week European Central Bank President Christine Lagarde pushed back against market bets for a rate hike, stating it was very unlikely such a move would occur in 2022.
Central bankers are proceeding cautiously with the normalization of monetary policy, allowing their economies as much time as possible to recover from the ravages of the pandemic.
Such caution may well be warranted, especially in Europe, given that coronavirus infections are hitting record levels in many countries across the region as winter takes hold.
"The current pace of transmission across the 53 countries of the European Region is of grave concern," regional World Health Organisation head Hans Kluge said Thursday, adding there could be 500,000 Covid-related deaths in the region by February.
In economic news, German industrial production fell 1.1% in September, disappointing hopes for a rebound from the previous month’s revised 3.5% drop. September retail sales are also due in the Eurozone, but the main release will be the U.S. nonfarm payrolls later in the session, where variables such as earnings growth and labor force participation will arguably be as important as the headline job creation number.
Economists expected payrolls to rise by 450,000 in October, a considerable improvement from the 194,000 rise in the prior month, which was the lowest in eight months.
Crude prices strengthened Friday after OPEC+ decided to maintain their stance of gradually increasing supply at a meeting Thursday, rebuffing calls for a more substantial increase in output.
The Organization of the Petroleum Exporting Countries and their allies including Russia, a group called OPEC+, confirmed a monthly increase of 400,000 barrels a day, not bowing to pressure from U.S. President Joe Biden, among others.
Still, Brent is on track for a decline of nearly 4% this week, the second straight weekly drop. U.S. oil is heading for a decline this week of nearly 5%.