A fragile sense of optimism is gracing European markets at the start of the final session of a turbulent week, with stocks poised to open higher as investors cling to the promise of an imminent US interest rate cut.
But this is a rally on a knife’s edge, as the entire financial world now holds its breath for a single, pivotal report that could either validate the recent gains or send a shudder through the global system.
After a brutal start to the week, where fears over government debt and fiscal plans triggered a global sell-off, sentiment brightened considerably on Thursday.
A preliminary US payrolls report was just soft enough to boost market bets on a Federal Reserve rate cut in September, but not so weak as to stoke fears of a severe economic downturn.
The effect was immediate and powerful: as of Friday morning, CME’s FedWatch tool was pricing in a stunning 99 percent probability of a September cut.
A pivotal verdict from the American worker
Now, all eyes are on the official August jobs report.
The market is desperate for another “Goldilocks” reading—not too hot, not too cold—that will reinforce those rate-cut expectations without signaling a deeper economic rot.
Economists polled by Dow Jones are forecasting the addition of a modest 75,000 jobs last month, a figure that would cement the case for the Fed to act.
A glimmer of strength across the pond
While the market’s main focus is on the US, a pocket of unexpected strength has emerged in the United Kingdom.
British retail sales volumes rose by 0.6 percent in July, decisively beating the 0.2 percent gain that economists had forecast.
At the same time, data from the lender Halifax showed house prices also ticked higher in August.
Paul Dales, chief UK economist at Capital Economics, said the data showed the economy had some “decent momentum” at the start of the third quarter.
But he tempered the optimism with a note of caution, warning that the looming prospect of tax rises in the November budget may soon spur households to be more cautious.
Headwinds for a wind giant
Against this broadly positive backdrop, a stark corporate warning has served as a potent reminder of the risks still lurking in the market.
Shares of the Danish wind farm developer Orsted were seen opening lower after the company cut its full-year earnings guidance, citing lower-than-normal offshore wind speeds across its portfolio.
The outlook cut comes at a particularly fraught moment for the company.
It is currently in the midst of a massive 9.4 billion dollar rights issue and is simultaneously suing the Trump administration in a desperate bid to restart construction on a blocked offshore wind farm in New England.
The confluence of operational headwinds and political obstacles has created a perfect storm for one of the world’s renewable energy leaders.
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