European stock markets plummet: European stocks fell for a fifth straight session on Friday, their worst performance since early August. The drop followed the release of a long-awaited US jobs report, which sent mixed signals about a possible interest rate cut by the Federal Reserve later this month. The pan-European STOXX 600 index fell 1%, ending a four-week winning streak and posting a 2.5% loss for the week, the steepest drop since the first week of August.
Fed rate cut is uncertain
US jobs data for August came in below expectations, raising uncertainty over whether the Fed will opt for a 50 basis point (bp) rate cut or a smaller 25 bp reduction. Despite a decline in the unemployment rate, investors assigned just a 23 percent probability to a 50 bp cut as of 1611 GMT, although previous pricing had indicated a 51 percent chance, according to CME’s FedWatch tool. “Over the next few weeks, markets will remain volatile, with high uncertainty as investors debate the Fed’s next move,” said Michael Brown, senior research strategist at Pepperstone. Across Europe, all major country indices fell around 1 percent. Germany’s DAX index fell 1.6 percent to hit a two-week low after data showed a 2.4 percent decline in industrial output for July, far exceeding the 0.3 percent drop expected.
Technology, materials, energy, slides
The technology, commodities and energy sectors were the biggest detractors on the STOXX 600, all down more than 2%. The technology sector, particularly chip stocks, was hit hard following weak results from Broadcom. Falling oil and metal prices weighed on commodity stocks, while the interest rate-sensitive banking sector fell 1.8%. However, the real estate sector bucked the trend and gained 0.6% to hit its highest level since August 2022. In other economic data, the Eurozone GDP Growth was revised down to 0.2 percent for the second quarter, from the previously estimated 0.3 percent.
ECB rate cut expected
Looking ahead, the European Central Bank is expected to cut interest rates by 25 basis points next week. However, European markets will likely be influenced by US inflation data, which is expected to be the main driver. “The Federal Reserve is the key player right now, with the ECB’s path largely anticipated, while the Fed’s outlook remains uncertain,” Brown added. Among individual stocks, Swedish carmaker Volvo Cars saw its shares plunge 5.7 percent after it cut its margin and revenue targets for the second time this year. Meanwhile, Poland’s InPost rose 11.7 percent to lead the STOXX 600 after reporting a 29 percent rise in second-quarter profit.(With contributions from Reuters)
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.