European stock futures edge lower; Ericsson reports sharp drop in 2Q profit

Investing.com – European stock markets are expected to open slightly lower Friday, as investors bank profits after a strong week, waiting for the start of the next quarterly earnings season.

At 02:00 ET (06:00 GMT), the contract in Germany traded 0.1% lower, the contract in the U.K. fell 0.1%, while in France traded largely flat.

The main European stock indices posted healthy gains Thursday, with the broad-based index rising 0.6%, its fifth positive session in a row, the longest run of daily gains in nearly three months.

Optimism over U.S. ‘soft landing’

These gains followed the release of data showing rapidly cooling inflation in the U.S., suggesting that the may be close to ending its aggressive rate-hiking cycle, probably after one more increase later this month.

This has raised expectations that the U.S. economy, the largest in the world and a major global growth driver, may avoid a recession this year, prompting ‘soft landing’ optimism.

Weakness in U.K., China

The economic situation is less impressive in Europe, particularly in the U.K., where data released on Thursday showed that its contracted in May. Yet is running at the highest level in the G7, and more than four times higher than the Bank of England’s 2% medium-term target.

This points towards further interest rate hikes ahead, further weighing on economic activity and making a recession later this year a distinct possibility.

Additionally, the latest economic signals from China, a major export market for many of Europe’s largest companies, indicate the second-largest economy in the world is still struggling to recover from its COVID hit.

Ericsson reports sharp drop in 2Q profit

The new European quarterly earnings season starts in earnest next week, but Ericsson (ST:) has reported a 62% fall in second-quarter adjusted operating profit on Tuesday, slightly beating market expectations.

The Swedish telecom equipment maker cited increasing demand for 5G despite “challenging market conditions”.

Results from British luxury fashion house Burberry (LON:) will also be in the spotlight Friday, while across the pond a number of the largest American banks are scheduled to report their quarterly earnings.

Oil on course for another positive week

Oil prices stabilized Friday, but remained on course for their third consecutive weekly gain on the prospect of tighter supplies as well as soft U.S. inflation data.

Several Libyan oil fields, including the country’s second-largest, Sharara, were shut down on Thursday, while a suspected pipeline leak suspended exports from Nigeria’s Forcados terminal.

These disruptions in supply follow last week’s announcement of additional output cuts by Saudi Arabia and Russia, and point to tighter oil markets in the coming months.

By 02:00 ET, the futures traded 0.2% higher at $77.04 a barrel, while the contract climbed 0.2% to $81.48.

Both contracts traded near their highest levels since late April, and were on track to rise around 4% this week.

Additionally, fell 0.1% to $1,962.25/oz, while traded largely flat at 1.1221.