European Markets Edge Up as Investors Assess Federal Reserve Risks

European Markets Edged Higher On Friday As Stocks Attempted To Rebound From the Previous Day's Selloff. The Outlook For Monetary Policy Remained Firmly In Focus.

The Stoxx 600 index was up 0.3% in early afternoon trading, with retail stocks leading the way with a 1.1% gain. Most sectors were in positive territory, although gains were modest overall.

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The European blue chip index closed lower in the previous session as global market sentiment soured after disappointing December retail sales figures out of the United States. This has resurfaced concerns about a possible recession.

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Investors are worried that the Federal Reserve will keep increasing interest rates even though there are signs that inflation is slowing down.
Both the Dow Jones Industrial Average and the S&P 500 lost ground for the third straight day on Thursday, with U.S. stock futures cautiously higher in early premarket trade on Friday.

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Shares in Asia-Pacific were mostly higher on Friday as investors digested Japanese inflation data. The data showed that nationwide core consumer prices rose by an annual 4% in December, the fastest inflation rate since 1981.

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The World Economic Forum in Davos, Switzerland ended on Friday, with policymakers and CEOs discussing the key issues surrounding the economy, financial markets, geopolitics and climate change.

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On the final day of the summit, CNBC spoke to a number of delegates, including former Treasury Secretary Larry Summers, European Central Bank President Christine Lagarde, Bank of Japan Governor Haruhiko Kuroda, French Finance Minister Bruno Le Maire and International Monetary Fund Managing Director Kristalina Georgieva.
Former U.S. Treasury Secretary Larry Summers has warned that if central banks fail to bring inflation back under control, it would be a "great tragedy" for the global economy.

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At the conclusion of the World Economic Forum in Davos, Switzerland, on Friday, Summers said that economists and business leaders at the summit were experiencing an "exhilaration of relief." However, he cautioned policymakers against resting on their laurels.

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Christine Lagarde, president of the ECB, has warned against a "subsidy race" in European fiscal policy. She has urged EU member states to focus on structural reforms instead.

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In 2021, everybody underestimated inflationary pressures and, in hindsight, monetary policy was a bit too expansionary, according to Swiss National Bank Chairman Thomas Jordan.

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At a WEF panel on the future of monetary policy, he discussed inflation in Europe. Close Brothers shares fell more than 12% in early trading after the company's update showed subdued performance at its subsidiary Winterflood Securities. Avanza, a Swedish stockbroker, surged 8.5% to the top of the Stoxx 600 after posting better-than-expected earnings for the fourth quarter and proposing a dividend of 7.5 Swedish krona ($0.73) per share.

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Retail sales in the UK unexpectedly fell by 1% in December, according to the latest data from the Office of National Statistics (ONS). This was attributed to higher inflation, which made Christmas shoppers less willing to spend.

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A poll of economists conducted by Reuters predicted that retail sales would increase by 0.5% per month in the lead-up to the end-of-year festivities.
Retail sales in the UK have been declining for the past two months, with a sharp drop of 5.8% in December compared to the same month in 2021. This is according to estimates from the Office for National Statistics (ONS).

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The U.K. has been trying to keep inflation under control, and it has softened for two months in a row. However, it still came in at 10.5% in December.
Britain's FTSE 100 is expected to open around 35 points higher at 7,782, while Germany's DAX is seen gaining around 80 points to 15,000. France's CAC 40 is also seen opening around 43 points higher at 6,995.

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The stock of a biotechnology company that develops and manufactures enzymes for pharmaceuticals was up by more than 10% last month, making it one of the top performers in the sector.

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All eight Wall Street analysts who cover the stock have a buy rating on it, with their median price target pointing to a potential upside of 118% over the next 12 months.
Steven Glass of Pella Funds Management recently said that the sliding U.S. dollar is good news for commodities.

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