European stocks higher; quarterly earnings, U.S. inflation in focus

European stock markets traded higher Thursday, with investors digesting more corporate earnings ahead of the release of a key U.S. inflation reading.

At 03:50 ET (07:50 GMT), the DAX index in Germany traded 0.8% higher, the CAC 40 in France gained 1.3% and the FTSE 100 in the U.K. climbed 0.1%.

Earnings in full flow

The main European indices have continued the positive tone of the previous session, as the banking sector steps further away from the one-month lows seen on Tuesday after the Italian government announced a windfall tax on its lenders.

The government in Rome quickly clarified that the 40% tax would not amount to more than 0.1% of their total assets, and this helped restore fragile investor confidence.

The earnings season remains in full flow Thursday, with Siemens (ETR:SIEGn) stock falling 2.6% after the German engineering group reported third-quarter profit below expectations, even as it noted a “normalization in demand”, particularly in China.

Thyssenkrupp (ETR:TKAG) stock rose 2.8% after the German industrial conglomerate said it was now targeting the upper end of its operating profit outlook range in 2023, citing a robust third quarter that showed better-than-expected results at its materials and steel units.

Allianz (ETR:ALVG) stock rose 3.2% and Zurich Insurance (SIX:ZURN) rose 1.6% after both the insurance companies reported better-than-expected results.

Hapag Lloyd (ETR:HLAG) stock fell 2% after the German container shipper posted a drop of 67% in net profit for the first half of 2023, from a year earlier,

U.S. inflation release in spotlight

However, the day’s main event will be the release of the latest U.S. inflation data.

The headline annual CPI figure is forecast to pick up slightly in July to 3.3%, while the core rate, which excludes volatile food and energy prices, is forecast to climb 4.8% on an annual basis.

The Federal Reserve next meets in September, and a subdued inflation release could cement expectations that the policymakers will agree to end its interest rate hikes.

Crude slips ahead of key U.S. inflation data

Oil prices edged higher Thursday, remaining near multi-month highs ahead of key U.S. inflation data later in the session.

U.S. inventories unexpectedly grew in the week to August 4, data from the Energy Information Administration showed Wednesday, but there was also a much bigger-than-expected draw in gasoline and distillate stockpiles.

This helped the crude market push higher despite a sluggish economic recovery in China, the world’s largest oil importer.

By 03:50 ET, the U.S. crude futures traded 0.2% higher at $84.58 a barrel, while the Brent contract climbed 0.3% to $87.78. Brent hit a six-month high on Wednesday, while WTI touched its strongest level since November 2022.

Additionally, gold futures edged higher to $1,951.15/oz, while EUR/USD traded 0.3% higher at 1.1008.