European stock markets were muted on Friday after the Bank of England (BoE) warned that the UK is set to fall into a recession at the end of this year, and into 2023.
In London, the FTSE 100 (^FTSE) fell 0.2% after opening, while the CAC (^FCHI) was trading flat in Paris, and the Frankfurt DAX (^GDAXI) was also treading water.
The lacklustre mood came as the central bank said on Thursday that Britain was heading into deepening economic misery, with a recession expected this winter that will last over a year.
It also said that inflation would surge over 13% along with a rise in unemployment and a continued squeeze on living standards following the sharp jump in gas prices.
Elsewhere, the the latest UK house price data from Halifax showed a 0.1% dip in July — the first decline since June 2021. The average value of a home stood at £293,221 ($356,373), which is still 11.8% higher than a year ago.
The fall reflects the impact of a deepening cost of living crisis, as inflation soars and the economy heads towards a recession.
Watch: What is a recession and how do we spot one?
Across the pond on Wall Street, S&P 500 futures (ES=F) were up 0.2%, Dow futures (YM=F) gained 0.2%, and Nasdaq futures (NQ=F) were also 0.2% higher as trade began in Europe.
On Thursday, US markets finished the session mixed, with the Nasdaq 100 closing higher with the Dow and S&P 500 closing lower, while yields fell too.
“The fall in yields suggests that bond markets are ignoring central bank tightening, and focussing more on a looming slowdown and recession,” Michael Hewson of CMC Markets said.
Traders will have their eyes set on the latest US jobs report due later today, which will show the health of America’s employment market as its economy slows.
Economists predict job creation slowed in July, from 372,000 the month before to 250,000.
Read more: UK average house price falls for the first time in a year to £293,221
Hewson said: “It will still be the lowest number this year, however the strength of the labour market may well be starting to increase in the level of importance when it comes to how aggressive the Fed is likely to be when it comes to tackling inflation.
“Wages are expected to remain steady at or around 5%, and the unemployment and participation rate to remain steady at 3.6% and 62.2%.”
Stocks in Asia traded higher on Friday, with the Nikkei (^N225) climbing 0.9% in Japan while the Hang Seng (^HSI) rose 0.2% in Hong Kong, and the Shanghai Composite (000001.SS) gained 1.2% on the day.
Watch: How does inflation affect interest rates?
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