Stocks inch up as investors look for fresh direction after U.S. inflation spike

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European stocks inched higher on Friday, with U.S. equity futures flat as investors parsed stronger-than-expected inflation Stateside and a European Central Bank meeting a day prior.

Investors will also be keeping an eye on the G7 (Group of Seven) meeting of leaders in Cornwall, England on Friday.

The Stoxx Europe 600 index SXXP, +0.33%, up 0.4% for the week so far, rose 0.3%, while the German DAX DAX, +0.07% was flat , the French CAC 40 PX1, +0.42% rose 0.4%, and the FTSE 100 UKX, +0.52% rose 0.5%.

U.S. stock futures ES00, +0.06% YM00, +0.11% NQ00, +0.06% were largely unchanged, following a positive day on Wall Street, with the S&P 500 SPX, +0.47% logging a record finish as investors brushed aside data showing annual U.S. consumer prices climbed 5% in May to a 13-year high.

Read: Inflation is surging. How high will it go? Check out MarketWatch’s new tracker.

Markets have been concerned that signs of rising inflation globally will push central banks to tighten ultra-easy monetary policies and stimulus enacted to fight the pandemic fallout. But the Federal Reserve has maintained that it sees price pressures as transitory and markets continue to believe that, said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

“The inflation data needed to either fall dramatically or print much higher than last month to move the needle. In the end, it came in at no man’s land levels triggering a reversion to the mean behaviorally for financial markets,” Halley said. The Federal Open Market Committee meets next week, but no change in policy is expected.

Meanwhile, the European Central Bank on Thursday left interest rates unchanged and made no tweaks to the size of its asset-buying programs at its policy meeting. 

Read: No ECB ‘taper tantrum,’ but stage set for market showdown later this year

On the data front, the U.K. economy expanded 2.3% in April, its fastest monthly pace since July 2020, the Office for National Statistics said.

Yields continued to fall on both sides of the Atlantic, with that of the German 10-year bund TMBMKDE-10Y, -0.280% down 1 basis point to -0.268%, and the 10-year U.S. Treasury bond yield TMUBMUSD10Y, 1.431% down 3 basis points to 1.437%, hovering at a three-year low.

Banks were the weakest sector in Europe, falling in step with bond yields. Shares of Deutsche Bank DB, -1.92% slid 3%, those of Société Générale GLE, -1.44% lost 1.6% and Crédit Agricole ACA, -0.73% dropped 1%.

Resource stocks were rising, with metals pricing climbing. Shares of miners Rio Tinto RIO, +1.62% RIO, +0.03% and Glencore GLEN, +2.25%, with those shares up 1% and 2%, respectively.

Shares of Swedish retail chain Hennes & Mauritz HM.B, +0.89% were also climbing, up 1%.