European stock markets drifted lower Friday, selling into early gains as disappointing economic data overturned the optimism generated by the announcement of the U.S. Federal Reserve’s new monetary policy framework.
At 3:40 AM ET (0740 GMT), the DAX in Germany traded 1% lower, the CAC 40 in France fell 0.7% and the U.K.'s FTSE index was down 0.6%.
German consumer morale worsened heading into September, with the GfK consumer sentiment index falling to -1.8 from an upwardly revised -0.2 in August.
The drop followed three consecutive increases from June to August, and casts doubt about the strength of the recovery in Europe’s largest economy, particularly with coronavirus cases seemingly on the rise again.
Additionally, French consumer spending rose just 0.5% in July from June, slowing from a surge of 10.3% in June, and short of economists' average forecast for an increase of 2.0%.
These numbers overshadowed the Federal Reserve’s new stance to achieve inflation averaging 2% over time, offsetting below-2% periods with higher inflation "for some time," and to ensure employment doesn't fall short of its maximum level.
“Their new language gives them the flexibility to let the economy run a little hotter before contemplating raising interest rates and gives the green light to more modest yield curve steepening and dollar weakness,” analysts at ING said, in a research note.
The need for an accommodative policy was illustrated by Thursday’s weekly claims data which showed some 27 million Americans are still receiving some kind of government unemployment assistance.
In corporate news, Norwegian Air Shuttle (OL:NORR) stock slumped 10% after it warned that there is "significant" doubt over its ability to continue as a going concern if it can't meet its financial obligations next year.
Daimler (OTC:DDAIF) dropped 0.5%, outperforming the wider DAX index, after announcing Amazon (NASDAQ:AMZN) had ordered 1,800 electric vans from its Mercedes-Benz unit for its European delivery fleet.
Oil prices were a little lower Friday, with Hurricane Laura blowing through Louisiana and Texas, the heart of the U.S. oil industry, without causing major damage to refineries.
“Limited refinery damage and the quick resumption of capacity is good news for crude oil demand, although for now that is not reflected in the market,” said analysts at ING, in a research note.
U.S. crude futures traded 0.6% lower at $42.80 a barrel, while the international benchmark Brent contract fell 0.4% to $45.40.
Elsewhere, gold futures rose 1.1% to $1,952.80/oz, while EUR/USD traded 0.6% higher at 1.1896.
