European stock markets stabilized Friday, after a strong week, while results from the telecoms sector disappointed.

At 03:20 ET (07:20 GMT), the DAX index in Germany traded 0.1% lower, the FTSE 100 in the U.K. traded down 0.1%, while the CAC 40 in France rose 0.2%.

Ericsson reports sharp drop in 2Q profit
The new European quarterly earnings season starts in earnest next week, but Ericsson (ST:ERICb) stock fell over 5% after the Swedish telecom equipment maker reported a 62% fall in second-quarter adjusted operating profit, citing “challenging market conditions” even with increasing demand for 5G.

Nokia (HE:NOKIA) stock also fell over 5% after the Finnish telecom group cut its full-year guidance after it warned that its sales in 2023 will be below its previous estimate. Nokia is scheduled to publish its full second-quarter earnings report on July 20.

Elsewhere, Burberry (LON:BRBY) stock edged lower after the British luxury fashion house maintained its full-year guidance despite resurgent demand from China lifting first-quarter sales.

Across the pond, a number of the largest American banks will be in the spotlight as they report their quarterly earnings.

Optimism over U.S. ‘soft landing’
The main European stock indices posted healthy gains Thursday, with the broad-based Stoxx 600 index rising 0.6%, its fifth positive session in a row, the longest run of daily gains in nearly three months.

These gains followed the release of data showing rapidly cooling inflation in the U.S., suggesting that the Federal Reserve may be close to ending its aggressive rate-hiking cycle, probably after one more increase later this month.

This has raised expectations that the U.S. economy, the largest in the world and a major global growth driver, may avoid a recession this year, prompting ‘soft landing’ optimism.

Weakness in U.K., China
The economic situation is less impressive in Europe, particularly in the U.K., where data released on Thursday showed that its economy contracted in May. Yet inflation is running at the highest level in the G7, and more than four times higher than the Bank of England’s 2% medium-term target.

This points towards further interest rate hikes ahead, further weighing on economic activity and making a recession later this year a distinct possibility.

Additionally, the latest economic signals from China, a major export market for many of Europe’s largest companies, indicate the second-largest economy in the world is still struggling to recover from its COVID hit.

Oil on course for another positive week
Oil prices edged lower Friday, but remained on course for their third consecutive weekly gain on the prospect of tighter supplies as well as soft U.S. inflation data.

Several Libyan oil fields, including the country’s second-largest, Sharara, were shut down on Thursday, while a suspected pipeline leak suspended exports from Nigeria’s Forcados terminal.

These disruptions in supply follow last week’s announcement of additional output cuts by Saudi Arabia and Russia, and point to tighter oil markets in the coming months.

By 03:20 ET, the U.S. crude futures traded 0.3% lower at $76.65 a barrel, while the Brent contract dropped 0.4% to $81.05.

Both contracts traded near their highest levels since late April, and were on track to rise around 4% this week.

Additionally, gold futures fell 0.2% to $1,959.85/oz, while EUR/USD traded 0.2% lower to 1.1204.