A look at the day ahead in European and global markets from Ankur Banejee

An action-packed week in the markets is heading for a more subdued finish as traders await U.S. payrolls data, although the lingering threat of a trade war kept investors hesitant about placing major bets.

Stock trading in Asia was mostly directionless with the notable exception of China, where an AI-fuelled rally sent Hong Kong's Hang Seng surging to a three-month high on Friday and its strongest weekly gain in almost four months.

Investors are betting the artificial intelligence advance of home-grown startup DeepSeek will lead to a boom in the sector, while for now mostly shrugging off the trade war saga that kicked off at the start of the week.

U.S. President Donald Trump imposed and then suspended tariffs on Mexico and Canada early this week but his duties on Chinese goods went ahead. Beijing followed with retaliatory measures, seen by most investors as the opening gambit of long, drawn-out negotiations.

But with little news on whether and when Trump and Chinese President Xi Jinping would talk, investors are focusing on the broader economic picture and company earnings.

A social media post could change all that, but for now things are looking bright for European stock bourses. They have had a stellar start to the year as investors seize on the valuation gaps between relatively cheap European stocks and some of their foreign counterparts.

The pan-European STOXX 600 index, which closed at a record high on Thursday, has risen 8% since the start of 2025, while benchmark indexes in Germany and France are up about 10%. The S&P 500 is up 3% for the same period.

On Friday, though, futures indicate a subdued open for European stocks, suggesting a bit of profit-taking might be on the cards.

The main focus during U.S. trading hours will be the nonfarm payrolls data, which is expected to show an increase of 170,000 jobs last month after surging 256,000 in December, according to a Reuters poll of economists.

Slow U.S. job growth in January is unlikely to be enough to prod the Federal Reserve to resume interest rate cuts before the end of the first half. Markets are fully pricing in the next 25 basis point cut in July.

Key developments that could influence markets on Friday:

German December industrial and trade data

UK housing price data for January

U.S. payrolls data for January