European stock futures mixed; caution ahead of key U.S. payrolls release

European stock markets are expected to open in a subdued manner Friday after the previous session’s sharp losses, as signs of a robust U.S. labor market prompted concerns of rising interest rates ahead of the widely-watched monthly payrolls release.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.2%, while the FTSE 100 futures contract in the U.K. fell 0.3%.

European stocks suffered hefty losses on Thursday, following Wall Street lower, after data showed that U.S. labor market conditions remain tight, opening up the opportunity for the Federal Reserve to continue to tighten monetary policy after pausing its year-long rate hiking cycle in June.

U.S. labor market remains robust
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.

German economy struggles to recover
Back in Europe, German industrial production fell 0.2% on the month in May, indicating that the industrial sector continues to struggle despite a small increase the prior month.

The eurozone’s largest economy is struggling to recover 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.

Yellen continues with China visit
Elsewhere, U.S. Treasury Secretary Janet Yellen continues her visit to China, meeting senior Chinese officials as she tries to steady an increasingly tense relationship between the world’s two largest economies.

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 02:00 ET, the Brent contract climbed 0.6% to $76.94, while U.S. crude futures traded 0.6% higher at $72.22 a barrel. Both benchmarks were set to gain about 2% for the second straight week.

Additionally, gold futures rose 0.2% to $1,919.80/oz, while EUR/USD traded 0.1% higher at 1.0893.