European Stocks Edge Higher Ahead of U.S. Jobs Data as Investors Weigh Fed Outlook and Geopolitical Risks

European equity markets traded modestly higher on Friday, with investors adopting a cautious tone ahead of the release of key U.S. labor market data that could play a decisive role in shaping expectations for Federal Reserve monetary policy in 2026.

By early trading, Germany’s DAX rose 0.1%, France’s CAC 40 gained 0.5%, and the U.K.’s FTSE 100 advanced 0.3%, reflecting restrained optimism across the region.

U.S. Payrolls in Focus as Markets Assess Fed Path

Global investor attention was firmly fixed on the U.S. nonfarm payrolls report due later in the session, widely seen as a critical gauge of the health of the world’s largest economy. The data is expected to show that the U.S. added around 57,000 jobs in December, down from 64,000 in November, pointing to a labor market that is slowing but not deteriorating sharply.

The Federal Reserve cut interest rates at each of its final three meetings in 2025, placing greater emphasis on emerging labor market weakness than on lingering inflation pressures. While the central bank is expected to keep rates unchanged at its next meeting, uncertainty remains high over how many additional cuts could follow, given growing divisions among policymakers.

European Data Offers Mixed Signals

In Europe, data provided some cautious encouragement. German industrial production unexpectedly rose 0.8% month on month in November, defying expectations for a contraction and suggesting that the eurozone’s largest economy may have ended the year on a firmer footing.

However, concerns remain over consumer demand across the bloc. Eurozone retail sales figures for November, due later in the day, are expected to show that households continue to face pressure from elevated living costs and economic uncertainty.

Political and Legal Uncertainty Adds to Market Caution

Political developments also remained in focus. Greenland’s future continued to attract attention after comments indicating that the U.S. could explore investments in critical minerals projects on the island, ahead of upcoming talks between U.S. and Danish officials. President Donald Trump has repeatedly stressed Greenland’s strategic importance to U.S. national security.

Separately, markets are watching closely for a potential U.S. Supreme Court ruling on the legality of the Trump administration’s global tariffs. A decision that questions the administration’s authority to impose the duties could inject significant uncertainty around roughly $150 billion in tariffs already paid by importers.

Mining Sector in Spotlight After Mega Merger Talks

In the corporate space, the mining sector drew intense attention after Glencore confirmed it was in early discussions over a possible acquisition by Rio Tinto. A deal would create the world’s largest mining company, combining Rio Tinto’s dominant iron ore business with Glencore’s diversified commodities and trading operations.

Market participants noted that while the strategic rationale could be compelling, cultural differences between the two groups may pose a challenge. Rio Tinto currently holds a market value of about $142 billion, compared with Glencore’s $65 billion.

Elsewhere, U.K. retailer J Sainsbury upgraded its outlook, now expecting retail free cash flow of more than £550 million for the current financial year after strong grocery-led performance over the Christmas period. Rival retailers Tesco and Marks and Spencer also reported robust holiday sales, underscoring resilience in food spending.

Oil Prices Rise on Supply Disruption Fears

Oil prices moved higher on Friday and were on track for a third consecutive weekly gain, supported by concerns over potential supply disruptions. Brent crude rose 0.8% to $62.47 a barrel, while U.S. West Texas Intermediate climbed 0.8% to $58.21 a barrel.

Prices had already surged more than 3% on Thursday, recovering from earlier declines. Ongoing unrest in Iran and uncertainty following the U.S. capture of Venezuelan President Nicolás Maduro last week have heightened fears over global supply stability, adding upward pressure to crude markets.