European Stocks To Open Higher On China Optimism, But Gains To Be Limited Due To Upcoming Data.

The unexpectedly upbeat report on Chinese manufacturing activity is expected to help some European stock markets begin higher on Friday, but gains are likely to be modest as investors wait for the publication of the highly awaited U.S. nonfarm payrolls.

The pan-European Stoxx 600 index fell 2.6% in August, making it a challenging month for European investors. However, the new month has started with a more bullish slant, bolstered by a pleasant surprise from China.

An earlier Friday private-sector poll revealed that industrial activity in the second-largest economy in the world, which is a significant export market for the biggest corporations in Europe, surprisingly increased in August.

This has given rise to some confidence that Asia's largest economy's slow post-COVID recovery is picking up speed, albeit this optimism must be restrained given the continuing challenging circumstances in China's crucial real estate sector.

Later on Friday, a number of the eurozone's nations are scheduled to report their manufacturing PMI figures, resulting in the final figure for the area as a whole.

Manufacturing activity slowed last month at its highest rate since the pandemic's beginning, and a slight rebound is anticipated for the August number.

Although data released on Thursday showed that eurozone inflation remained constant at 5.3% in August, challenging expectations for a drop to 5.1% as energy costs rose sharply over the month, European Central Bank President Christine Lagarde had previously hinted at a pause in the central bank's rate.

The August nonfarm payrolls statistic, which will be released in the US, is the day's most anticipated economic report.

Analysts predict that the U.S. economy added 170,000 jobs last month, down from 187,000 jobs the month before, and that the unemployment rate will remain at 3.5%.

Any indications of labour market strength would give the Federal Reserve greater motivation and leeway to continue raising interest rates.

With the expectation that the group of major petroleum producers will prolong output cutbacks until the end of the year, oil prices increased slightly on Friday, setting themselves up for significant weekly increases.

The Organisation of Petroleum Exporting Countries and allies, often known as OPEC+, have secured a fresh agreement with Moscow to further reduce supply. According to Russian Deputy Prime Minister Alexander Novak, Moscow will announce more production cuts next week.

The cutbacks will probably compound Saudi Arabia's and Russia's continuing production cuts, resulting in a tighter supply forecast for the remainder of the year.

(Sources: investing.com, reuters.com)