Stock markets wobble at end of uncertain week

European and US stock markets wobbled on Friday as dealers digested mixed data and looked forward to more corporate earnings reports. The dollar rose against the pound and yen as Federal Reserve officials pressed their case for further rate hikes to battle stubborn inflation, and data showed both economic activity and inflationary pressures remain strong.

Frankfurt and Paris stocks initially flipped between gains and losses after purchasing managers’ index (PMI) survey data showing eurozone business activity growth accelerated in April on the buoyant services sector -- but manufacturing shrank. They both ended the day up half a percentage point.

London, meanwhile, edged higher as investors eyed rebounding UK business activity despite sliding retail sales.

“There was a consistent theme across today’s euro-area PMIs. Activity levels surged in the services sector due to a robust demand backdrop, while manufacturing activity continued to contract,” said Monex Europe analyst Simon Harvey.

Wall Street’s main stock indices opened mixed, but turned lower after the US PMI hit an 11-month in April, but also stronger price pressure, increasing the chances of further interest rate hikes.

“The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January,” Chris Williamson, chief business Economist at S&P Global Market Intelligence, which compiles the PMI report.

“However, the upturn in demand has also been accompanied by a rekindling of price pressures,” which rose at their fastest rate since September, he added.

Investors are beginning to turn their attention to next month’s Fed rate decision.

The broad expectation is for another 25-basis-point hike.

However, debate surrounds whether the Fed will lift again in June or decide to pause, particularly in light of last month’s banking scare, which was widely regarded as a result of monetary tightening and could slow lending to businesses.

On Thursday, Philadelphia Fed chief Patrick Harker said “some additional tightening may be needed to ensure policy is restrictive enough” to support the Fed’s dual mandate of keeping both unemployment and inflation low.

Investors have also been keeping close tabs on the release of corporate earnings.

“This week’s trade has been a picture of hesitancy in front of earnings reports next week from many of the mega-cap stocks that have led this year’s advance and in the face of Fed officials talking about needing to raise rates further to bring inflation down,” said Briefing.com analyst Patrick O’Hare.

US tech giants Amazon, Microsoft, Google parent Alphabet, and Facebook owner Meta are publishing results next week, along with a slew of other corporate titans, including Swiss banks UBS and Credit Suisse, food group Nestle and oil majors Total Energies and Chevron.

“Stocks are still looking for a catalyst to drive them higher from here, but above all this hangs the worry about the Fed going further on tightening than the market currently expects,” said Chris Beauchamp, chief market analyst at online trading platform IG.

Asian stock indices closed lower on fears of a prolonged downturn after data Thursday indicated the US economy was slowing down.

Meanwhile, oil prices edged higher on Friday on strong economic data in the euro zone and Britain, but futures were on track for a weekly loss as interest rate uncertainty weighed.

Brent futures were up 50 cents, or 0.6%, at $81.60 a barrel by 11:30am. West Texas Intermediate crude (WTI) was up 49 cents, or 0.7%, at $77.87.

Brent was on track for a weekly loss of 5.5%, while WTI was set to fall 5.7%.

The euro zone economic recovery has unexpectedly gathered pace this month as the bloc’s dominant services industry saw already-buoyant demand rise, more than offsetting a deepening downturn in manufacturing, surveys showed.

“It looks like the economy is rebounding from a feeble winter at the moment, but manufacturing weakness remains a concern and dampens the upturn,” ING economics said in a note.

British businesses also reported a bounce in activity and the slowest input cost inflation in more than two years, an industry survey showed.

In India, refiners’ crude oil processing stayed near record peaks in March, provisional government data showed, catering to solid seasonal demand in the world’s third biggest oil consumer.

The prospect of tighter supply added further support, with analysts expecting draws from inventories from next month, owing to OPEC’s reduced output targets and rising Chinese demand.