Stocks – Europe Seen Lower on U.S./China Tensions; German Data Helps

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Investing.com – European stock markets are seen opening largely lower Friday, amid a major escalation of tensions between China and the U.S. and with little progress towards a new U.S. virus relief package. However, losses may be stemmed by signs of industrial revival in Germany.

At 2:10 AM ET (0610 GMT), the DAX futures contract in Germany traded 0.4% lower, the FTSE 100 futures contract in the U.K. fell 0.1%, while CAC 40 futures in France were largely unchanged.

U.S. President Donald Trump unveiled sweeping bans late Thursday on U.S. transactions with China’s ByteDance, owner of video-sharing app TikTok, and Tencent Holdings (OTC:TCEHY), operator of messenger app WeChat. These bans go into effect in 45 days.

Earlier this week President Trump said he would support the sale of TikTok’s U.S. operations to Microsoft (NASDAQ:MSFT) if the U.S. government got a “substantial portion” of the sale price. 

Tension has been simmering between the two powers for months, with the United States unhappy with China’s handling of the novel coronavirus outbreak and moves to curb freedoms in Hong Kong. The original cause of their tension – China’s trade surplus – surged back toward record levels in July, with exports surging 7.2% from a year earlier.

Meanwhile, negotiations on a U.S. virus relief deal ended Thursday night with the White House and Democrats making little headway. Investors will be keen to see whether an agreement can be reached before the end-of-the-week deadline, with President Trump threatening to issue an executive order if this deadline passes with no agreement.

German industrial production also impressed, climbing 8.9% in June, ahead of the 7.4% growth seen the previous month.

“The industrial sector is continuing to work its way out of the trough in production,” Ifo economist Klaus Wohlrabe said after Ifo published a survey showing that the mood among industrial companies improved for a third straight month in July.

This puts the focus squarely on the official U.S. employment report, due at 8:30 AM ET (1230 GMT). Nonfarm payrolls are expected to have increased by 1.6 million jobs in July, which would be a sharp step-down from the record 4.8 million in June. 

Oil prices weakened Friday, amid uncertainty over the new stimulus package in the U.S. and the impact that would have on fuel demand growth given the recent  resurgence of coronavirus infections. 

That said, WTI and Brent are both set for weekly gains of at least 4%, the most for the two benchmark contracts since the week ending July 3.

U.S. crude futures traded 0.2% lower at $41.86 a barrel, while the international benchmark Brent contract fell 0.2% to $45.01. 

Elsewhere, gold futures rose 0.2% to $2,061.40/oz, retreating a touch after hitting a record $2,077.85 an ounce earlier in the session. Gold has rallied more than 33% in 2020, putting it on track for the biggest annual gain in over four decades.