European stock markets are expected to open higher on Friday following moves by authorities in Europe and the United States to support struggling lenders. The actions are expected to prevent a full-blown banking crisis and boost investor confidence.
At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 0.4% higher, CAC 40 futures in France climbed 0.1%, and the FTSE 100 futures contract in the U.K. rose 0.8%. The positive sentiment is driven by the moves to support lenders, which have been hit hard by the COVID-19 pandemic and low interest rates.
The European Central Bank (ECB) has announced that it will provide long-term loans to banks to help them weather the economic impact of the pandemic. Meanwhile, the US Federal Reserve has said it will extend its emergency lending programs to support banks until the end of the year.
These moves have helped ease concerns about the health of the banking sector and the potential for a systemic crisis. Investors are now looking for signs of economic recovery, and the positive GDP growth forecasts for the year from Goldman Sachs for China have added to the upbeat sentiment.
The DAX futures contract in Germany, which tracks the performance of the top 30 companies on the Frankfurt Stock Exchange, is expected to benefit from the ECB’s support measures, as many of the companies listed on the index are reliant on bank financing. The CAC 40 futures contract in France, which tracks the performance of the top 40 companies on the Paris Stock Exchange, is also likely to gain from the ECB’s support.
The FTSE 100 futures contract in the U.K. is expected to be buoyed by the positive economic outlook, despite ongoing uncertainty surrounding Brexit negotiations. The index is dominated by multinational companies that derive a significant portion of their revenue from overseas, making them less sensitive to the domestic economic situation.
In conclusion, European stock markets are expected to open higher on Friday, boosted by moves to support struggling lenders and positive GDP growth forecasts for China. While the COVID-19 pandemic and Brexit uncertainty continue to cast a shadow over the global economy, these measures have helped ease concerns about the banking sector and given investors reason to be optimistic.