Markets subdued ahead of shortened US trading day

Associated Press

LONDON (AP) — Financial markets were subdued Friday as investors digested a run of economic figures in Europe and awaited clues on the strength of U.S. consumer spending on the first day of the Christmas shopping season.

In Europe, the focus was on official inflation and unemployment data. Both were encouraging, from the European Central Bank's perspective at least.

Eurostat, the EU's statistics office, reported a rise in the 17-country eurozone's inflation rate to 0.9 percent in November from October's near four-year low of 0.7 percent. Analysts said that will likely ease fears at the ECB of an imminent slide into deflation — falling prices can cause a protracted slide in consumer spending as individuals postpone spending in the hope of getting a better bargain down the line.

"That said, with the euro grinding higher again and efforts continuing in peripheral countries to regain competitiveness through austerity, the disinflationary pressures are likely to continue into 2014, so a rate cut in the first half of the year cannot be ruled out," said Craig Erlam, market analyst at Alpari.

Also, the statistics office reported that the number of people unemployed in the region fell by 61,000 in October. That was the first fall since April 2011 and may signal that the recovery from recession may start to be helping the labor market, particularly in the larger economies of Germany and France.

"One thing looks clear though, the upward momentum on the figure has almost grinded to a halt," said Erlam.

With trading volumes low due to the shortened session in the U.S. following Thursday's Thanksgiving holiday, markets were lackluster.

In Europe, the FTSE 100 index of leading British shares was up 0.2 percent at 6,666 while Germany's DAX was flat at 9,389. The CAC-40 was 0.1 percent higher at 4,307.

The tepid tone in the markets was evident in the performance of the euro, which was little changed around the $1.3606 mark, even though the figures make it less likely that the ECB will loosen policy further next week — a development that could have weighed on Europe's single currency.

Wall Street was poised for a solid opening with Dow futures and the broader S&P 500 futures up 0.2 percent.

The main focus later will likely be the start of the U.S. Christmas shopping season, commonly known as Black Friday as it's traditionally the day in the year most retailers start turning a profit. How the Christmas trading season goes is particularly important as retail sales account for around 70 percent of the U.S. economy.

"Black Friday in America will no doubt see shops packed to the rafters as the U.S. spends following the Thanksgiving festivities," said Alastair McCaig, market analyst at IG. "This barometer of retail spending power will be closely monitored as analysts try to gauge the likely spend over the month of December."

Earlier in Asia, the region's heavyweight, Japan's Nikkei 225, fell 0.4 percent to 15,661.87 after gaining strongly on Thursday. On Thursday, the Nikkei gained 1.8 percent to its highest close since December 2007. Japanese stocks have been boosted by the yen's decline, which helps exporters by making their goods less expensive abroad.

Elsewhere, Hong Kong's Hang Seng index added 0.4 percent to 23,881.29 while China's benchmark Shanghai Composite Index was nearly unchanged at 2,220.50.

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