European stock futures higher; U.S. debt optimism, solid earnings help tone

Investing.com – European stock markets are expected to open higher Friday, benefiting from the global optimism that a U.S. debt default will be avoided, but concerns about future growth remain.

At 02:00 ET (06:00 GMT), the contract in Germany traded 0.2% higher, in France climbed 0.3% and the contract in the U.K. rose 0.2%.

On Wall Street, the and indices closed at their highest levels since August 2022, and in Asia Japan’s has surged to its highest level since 1990.

This follows top U.S. congressional Republican Kevin McCarthy indicating confidence that an agreement to lift the U.S. debt ceiling, and thus preventing the country from defaulting on its obligations, can be achieved in the near future.

“I see the path that we can come to an agreement,” McCarthy said Thursday. “And I think we have a structure now and everybody’s working hard, and I mean, we’re working two or three times a day, then going back getting more numbers.”

This optimism is expected to continue in Europe Friday, adding to the positive tone generated by a significant number of major European companies delivering stronger-than-expected first-quarter results.

About half of the companies have reported first-quarter results so far and two-thirds of them exceeded estimates.

Friday is set to be relatively quiet in terms of corporate results, with a trading update from U.K. engineering company Smiths Group (LON:) the highlight.

However, it’s likely that more difficulties lie ahead as cash-strapped consumers rein in their spending and the first quarter’s relatively robust corporate margins come under pressure.

The raised interest rates earlier this month and further hikes look likely, with ECB Vice President saying on Thursday that he’s particularly concerned about the accelerating inflation in service industries.

German rose 0.3% in April, data showed earlier Friday, an annual rise of 4.1%, more than twice the ECB’s targeted inflation level.

Oil prices rose Friday as traders took advantage of the optimism surrounding the potential raising of the U.S. debt ceiling to buy back into heavily discounted markets.

The crude market is on course to add around 3% this week, the biggest weekly gain since early April, breaking a run of four straight weeks of losses. 

However, the immediate outlook still remains gloomy with elevated inflation data pointing to more interest rate hikes from global central banks and as weak economic data from China, the world’s largest crude importer, continued to emerge.

By 02:00 ET, futures traded 0.6% higher at $72.31 a barrel, while the contract climbed 0.7% to $76.39. 

Additionally, rose 0.3% to $1,965.10/oz, while traded 0.1% lower at 1.0768.