U.S. Stock Futures Hold Gains Despite Soft GDP

By Mike Bird and Ese Erheriene Features Dow Jones Newswires

U.S. stock futures held their gains Friday, despite data that showed the economy's output grew at the slowest pace in three years during the first quarter.

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Gross domestic product, the broadest measure of goods and services produced in the U.S., rose 0.7%, at a seasonally adjusted annual rate, in January through March, the Commerce Department said Friday. Economists surveyed by The Wall Street Journal had expected 1% growth. The data underscore the challenges facing the Trump administration as it seeks to rev up economic growth.

Futures pointed to 0.1% opening gains for the S&P 500 and the Dow Jones Industrial Average.

Elsewhere, the euro and government bond yields in Europe jumped on surprisingly strong inflation figures, while stocks there fell.

Stocks began the week strongly following the market-friendly result Sunday from the first round of elections in France, but have given back some ground since.

The Stoxx Europe 600 index slipped 0.2%.

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Official figures released earlier showed the eurozone's core inflation rate -- which excludes volatile food and energy prices -- at 1.2%, the highest level since 2013. Analysts were expecting a rise of 1%. Headline inflation reached 1.9%, touching the European Central Bank's target of slightly below 2%.

The euro was trading higher after the release, up 0.6% against the dollar at $1.093. Yields on 10-year German government bonds rose to 0.345%.

The euro had dropped Thursday on European Central Bank President Mario Draghi's insistence that the era of easy monetary policy isn't over in Europe.

"There is clearly a risk that we could stand at the June meeting with an ECB that changes its forward guidance in a more hawkish direction provided the cyclical situation looks good," said Pernille Bomholdt Henneberg, chief analyst at Danske Bank.

Despite the cooling in equity markets toward the end of the week, European equity funds recorded their strongest inflows in more than a year, according to EPFR Global data.

In the week to April 26, $2.4 billion entered European equity funds, which included the jump in equity prices -- particularly in the banking sector -- that came after the first round of the French presidential election. Those net flows are the strongest into European equities since December 2015.

"Europe is overweight financials, commodities and industrials relative to the U.S.," said David Stubbs, global market strategist at J.P. Morgan Asset Management.

"With stronger growth at home, a cyclical upswing globally, the euro competitive and trade recovering you should see an uptick -- this should be the year that earnings growth arrives," he added.

Bank of America Merrill Lynch analysts see continued gains for European equities in the next year, expecting the Stoxx Europe 600 index to rise to 420 from 387 currently, a gain of around 8.5%, on improved earnings.

Elsewhere in foreign exchange markets, the dollar was down across the board, falling 0.2%, according to the WSJ dollar index, which measures the greenback against a basket of international currencies.

The British pound also rose against the dollar, up 0.3% to $1.294, touching its highest levels since early October, despite British economic data showing a growth slowdown in the first quarter of the year.

In Asia, Japan's Nikkei 225 index closed down 0.3%. Hong Kong's Hang Seng Index fell 0.3%. China's Shenzhen A-share index bucked the trend, rising 0.4%.

South Korea's Kospi closed 0.2% lower after President Donald Trump said he wanted to renegotiate a trade deal with the country, in an interview with Reuters.

Mr. Trump also said a major conflict over North Korea's nuclear ambition is possible.

"The fact there's potential for a showdown with North Korea, that's always going to worry investors in Japan," said Andrew Sullivan, managing director of sales trading at Haitong International Securities. "You [might] get the North Koreans put into a corner and they feel they just have to do something...One risks pushing them too far."

Kosaku Narioka and Hiroyuki Kachi and

Yifan Xie

contributed to this article.

Write to Mike Bird at Mike.Bird@wsj.com and Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

April 28, 2017 08:54 ET (12:54 GMT)