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European stocks waver as traders digest weak inflation data

<a href="">Sara Sjolin</a>

Germany’s DAX reopens after connectivity glitch

Getty ImagesInflation data come in weaker than expectedDMAMBMCMDMEMGPREVIEWZBZBRZDZDRZFZGZQZRZSZTZU

European stock markets struggled for direction on Friday, as traders absorbed reports of another impending prominent departure from the U.S. administration, fueling worries about uncertainty in the White House, and disappointing inflation data for the eurozone.

What are markets doing?

The Stoxx Europe 600 index (^GDAXI) was up 0.1% at 377.39, but switching between small gains and losses. The benchmark on track for a 0.3% weekly decline.

Germany’s DAX 30 index (^GDAXI) rose 0.2% to 12,361.98. Trading in Frankfurt opened about 40 minutes late on Friday after a connectivity issue that prevented equal access for market participants to the trading system.

France’s CAC 40 index (^FCHI) was marginally higher at 5,268.47, while the U.K.’s FTSE 100 (:UKX.L) was up 0.1% at 7,149.88.

What is driving the market?

Turmoil in the Trump administration has added to volatile trade, with the U.S. president expected to fire his national security adviser H.R. McMaster, according to news reports, which would be the second high-profile firing from the White House this week. Secretary of State Rex Tillerson was replaced with Central Intelligence Agency Director Mike Pompeo on Tuesday.

White House press secretary Sarah Huckabee Sanders dismissed that suggestion in a tweet late Thursday, but administration officials have reportedly confirmed it.

Concerns over a possible trade war between the U.S. and key trading partners were still weighing on investors’ minds as well, analysts said. The White House said on Wednesday it will seek to trim the U.S.’s trade deficit with China by $100 billion, using tariffs. The European Union, meanwhile, was working to get the bloc exempt from the tariffs.

Closer to home, eurozone inflation data were in focus. Eurostat, the statistical office of the European Union, said inflation in the currency union fell to 1.1% in February, down from an initial estimate of 1.2% and weaker than the 1.3% recorded in January. Weaker inflation could deter the European Central Bank from rolling back its aggressive quantitative-easing program later this year.

The euro (XTUP:EURUSD) slightly pared its gain after the report, buying $1.2324, compared with as high as $1.2337 ahead of the data. The euro fetched $1.2306 late Thursday in New York.

Which stocks are in focus?

Shares of Siemens Healthineers AG (SHL.F) rose 3.1% as the stock made its market debut on the Frankfurt Stock Exchange.

NEX Group PLC (NXG.L) rallied 30% to £8.99 after confirming that it’s received a preliminary takeover approach from CME Group Inc. (CME).

Altice NV (ATC.AS) rose 1.6% after the debt-laden telecoms company late Thursday said underlying earnings rose in the fourth quarter and that it was seeing some recovery in the French market.

Berkeley Group Holdings PLC (BKG.L) dropped 3.7% as the home builder said while trading conditions in London and the southeast of the U.K. remain stable it doesn’t plan to step up building.

What are strategists saying?

• “Traders are continuing to tread lightly as worries about a possible trade war are still doing the rounds. Traders are tip-toeing around this morning as there is talk that President Trump will target China with tariffs. While no new developments have taken place, some bargain hunters are stepping in,” said David Madden, market analyst at CMC Markets UK, in a note.

• “The latest [inflation] data only strengthens the belief that we will see significant monetary policy divergence between the U.S. and eurozone this year,” said Jacob Deppe, head of trading at Infinox, in a note.

“In fact, monetary policy could open a new front in a U.S./eurozone trade war. European exports, reliant on a cheap Euro, will benefit from a continuing dovish monetary policy,” he added.

Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.

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