European stock markets opened slightly lower on Friday, reflecting investor caution ahead of the U.S. nonfarm payrolls report, a pivotal indicator for Federal Reserve rate expectations. Major indices, including Germany’s DAX, France’s CAC 40, and the U.K.’s FTSE 100, each slipped 0.1% in early trading.

U.S. Labor Market in the Spotlight

With limited economic data from Europe—primarily French and Spanish industrial production figures—attention has shifted to the U.S. labor market. December’s employment report is forecast to show an addition of 154,000 jobs, while the unemployment rate is expected to remain steady at 4.2%.

Recent labor data has been mixed due to disruptions from strikes and weather events, but job openings and initial claims suggest a resilient workforce. Investors anticipate these figures will align with a gradually cooling but stable U.S. labor market, reinforcing expectations of moderate Federal Reserve policy adjustments.

Current market sentiment reflects skepticism about aggressive rate cuts from the Fed in 2025, with projections leaning towards two reductions at most.

European Central Bank Faces Weaker Economic Conditions

In contrast to the U.S., the European Central Bank (ECB) is expected to adopt a more dovish stance as the eurozone grapples with weaker economic conditions. Analysts predict at least four rate cuts from the ECB in 2025, signaling ongoing challenges for the region’s economy.

Tech Sector Gains Highlight AI Growth

Corporate news centered on the tech sector, with Taiwan Semiconductor Manufacturing Company (TSMC) reporting a significant boost in December sales. This growth was driven by soaring demand from the artificial intelligence (AI) industry, further solidifying TSMC’s position as the world’s leading contract chipmaker.

Meanwhile, speculation in the luxury goods sector emerged as Italian financial newspaper Il Sole 24 Ore reported that Prada may be considering acquiring Versace from Capri Holdings. This potential acquisition highlights the consolidation trend in the luxury market.

Oil Prices Rise Amid Cold Weather Boost

Oil markets showed strong momentum on Friday, with both Brent and West Texas Intermediate (WTI) crude prices climbing 0.9%. WTI reached $74.57 per barrel, while Brent rose to $77.60.

Severe winter weather in the central and eastern U.S., coupled with extreme cold across Europe, has driven increased demand for heating, supporting oil prices. Over the past three weeks, Brent has gained 6%, while WTI has surged by 7%, marking a steady upward trend in energy markets.