European markets on the front foot as we look for a strong end to a volatile week

• FTSE 100 leads European markets higher
• Stronger US GDP and decline in core PCE inflation bolster rate cut hopes
• Volatility here to stay as big tech and central banks prepare to report next week

European markets are paving the way for a more optimistic end to the week in the US, with the Nasdaq futures signalling a potential bullish reversal after a week dominated by tech-led selling pressure. Chief amongst the gainers has been the FTSE 100, with the headline UK index pushing sharply higher thanks in part to a 7% spike in NatWest shares. However, the strength seen throughout the UK index has been relatively well distributed, with mining, energy, banking, healthcare, and industrial stocks all enjoying a strong end to the week.

Markets continue to digest yesterday’s data dump from the US, with a relatively healthy economic assessment coinciding with lower inflation pressures. The most notable release came in the form of the second quarter GDP figure of 2.8%, coming in above estimates of 2% thanks to strong consumer spending (2.3% from 1.5%). However, the quarterly core PCE inflation gauge provided markets with the confidence to continue their unwavering view that we will see the Fed kick off an aggressive period of monetary easing in September. The 2.9% Q2 core PCE release came in well below estimates, lifting hopes for a similar decline when the June core PCE figure is released later today.

As traders draw their breath following a volatile week that saw wide swings across the equities and commodities space, we are left weighing up whether this is an opportunity or indicative of further downside to come. Crucially, much of the weakness seen for big tech came in the wake of Tuesday’s Alphabet and Tesla earnings, raising concerns of a potential reversal for the highly valued Mag7 names. The size of the Alphabet declines in the face of very respectable numbers do serve to highlight the jitters within markets, with the likes of Microsoft, Amazon, Meta, and Apple facing a high bar when reporting next week. With rates decisions, US jobs data, and roughly a third of the S&P 500 reporting next week, traders will need to prepare for yet another period of major volatility as we wrap up July.