European stocks are set to close their first week higher in four, largely driven by a retreat in oil prices. Brent crude fell 1.1% to $105.47 a barrel, while West Texas Intermediate dropped 1.8% to $92.91. This pullback in oil is seen as a relief from inflation worries and could benefit consumer and rate-sensitive shares, though it might negatively impact major oil companies like BP and Shell.
The pan-European STOXX 600 advanced by 0.4%, nearing a two-week high, while national bourses such as Germany’s DAX, Italy's FTSE MIB, France’s CAC 40, and the UK’s FTSE 100 all climbed by 0.4% to 0.5%. The FTSE 100 is expected to open 32 points higher at 10,714. This positive market sentiment is also supported by an unexpected rise in UK consumer confidence, reaching its highest level since August 2024, with the GfK index rising to minus 13 from minus 14.
The global bond market, which has seen yields rise to multi-decade highs, is showing signs of stabilization. The 10-year Treasury yield slipped one basis point to 5.19%, and the two-year yield declined two basis points to 4.91%. Despite the easing oil prices, fears of inflation persist, bolstering expectations for further Federal Reserve rate hikes. Fed funds futures now imply a 73% chance of another rate hike next month, with more than 90 basis points of tightening still anticipated in the current cycle.
