European stock markets ignore the slowdown in the French economy

On Friday, European stock markets shrugged off a stalled French economy. Photo: Gonzalo Fuentes/Reuters

European stock markets continued their ascent on Friday as investors turned their attention to a series of corporate results, ignoring a flagging French economy.

In London, the FTSE 100 (^ FTSE) increased by 0.5% after opening, while the French CAC (^FCHI) climbed 0.7% and the DAX (^GDAXI) was 0.9% higher than Frankfurt.

It came as the French economy came to an unexpected halt in the first quarter of the year, with no change in GDP over the period. This marked a marked slowdown from the 0.8% growth recorded at the end of 2021.

“For the next few quarters, the growth outlook is not very bright. The sharp rise in inflation, which is now spreading more and more widely throughout the economy, is weighing on household incomes,” said ING’s Charlotte de Montpellier.

“The situation in China should weigh on production chains, complicating the supply of inputs and disrupting production in the months to come, but also on French exports.

“French economic growth should therefore remain weak. Although none of these factors is sufficient to tip the French economy completely into recession, the combination of all these factors at once drastically increases the risk of one or two quarters of negative growth for the rest of the year. year.

Elsewhere, Germany has reportedly dropped its opposition to sanctions on Russian oil.

Europe’s biggest economy has so far tried to block an energy ban from the Kremlin, warning that such a move would trigger a recession across the continent. However, Vice-Chancellor Robert Habeck has now said Germany “will not stand in the way” of further sanctions.

On the other side of the pond, S&P 500 futures (ES=F) were down 0.5%, Dow futures (JM=F) lost 0.1% and Nasdaq futures (NQ=F) fell by 0.8% with the start of trading in Europe.

The US economy unexpectedly contracted in the first quarter of the year on Thursday, contracting 0.4% in the first quarter, or 1.4% on an annualized basis. This is the weakest quarter since the start of the pandemic in 2020.

Read more: More than half of UK businesses will hike prices as inflation bites

Stock markets in Asia rose on Friday, taking the lead from Wall Street, but traders remain cautiously optimistic amid the ongoing war in Ukraine, soaring inflation, US interest rate hikes and lockdowns in China.

The Hang Seng (^HSI) jumped 3.3% in Hong Kong, and the Shanghai Composite (000001.SS) increased by 2.4%. In Japan, the Nikkei (^N225) climbed 1.8% on the day.

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