European markets were higher on Friday, capping off a strong week for global stocks. The pan-European Stoxx 600 index rose by 0.2% in early trading, driven mainly by a 1.1% increase in auto stocks. Over the week, the index gained more than 2%, marking its best weekly performance since 10 May.
In the United States, stocks also experienced notable gains, particularly on Thursday when weekly jobless claims fell, and retail sales data exceeded expectations. This eased fears of a U.S. recession, which had contributed to a significant global sell-off earlier in the month. Analysts suggest that the recent market volatility may also be linked to the typical August trend of lighter trading volumes, combined with effects from Japanese monetary policy decisions.
Although both the Stoxx 600 and Wall Street’s S&P 500 have yet to return to the levels seen at the start of the month, the consistent gains throughout the week have helped recover losses from earlier declines.
On Friday, U.K. retail sales data showed a recovery, with a 0.5% growth in July, following a 0.9% drop in June. Over the past three months, sales volumes rose by 1.1%, meeting expectations from a Reuters poll. However, according to Alex Kerr, a U.K. economist at Capital Economics, the retail rebound was not widespread, with sectors like food, clothing, and household goods underperforming. Kerr noted that rising real incomes, driven by decreasing inflation, are expected to boost consumer spending for the remainder of the year.
This positive retail data followed a report of U.K. inflation increasing to 2.2% in July, a smaller rise than anticipated, alongside a 0.6% economic growth in the second quarter. On the currency front, the British pound reached its highest level in two weeks against the U.S. dollar, rising by 0.24% to $1.288, and it also gained slightly against the euro.
The positive sentiment from the U.S. also influenced Asia-Pacific markets, which traded higher on Friday.
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