Paris (Reuters) – European stock markets ended lower on Friday after investors digested the wave of optimism brought on by the U.S. Federal Reserve’s decision to cut its key interest rates more than expected.
In Paris, the CAC 40 fell 1.51% to 7,500.26 points, while the German Dax fell 1.43% and the British Footsie declined 1.19%.
The EuroStoxx 50 index ended the session down 1.43%, while the FTSEurofirst 300 lost 1.45% and the Stoxx 600 fell 1.45%.
Caution took over European markets on Friday after a very optimistic Thursday in the wake of the Fed’s decision to lower its rates by 50 basis points, defending the vision of a soft landing for the American economy.
“The markets have regained some colour after weeks of hesitation, but still seem hesitant to no longer see the Fed as the enemy it once was,” summarises Florian Ielpo, head of research at Lombard Odier.
Economic data released next week, including confidence indices and the Eurozone composite purchasing managers’ index (PMI), will be closely watched ahead of the Fed’s preferred inflation indicator on September 27.
The central banks of England, China and Japan have decided not to change their main rates, illustrating the divergence of strategy between central banks across the world.
The session will also see the simultaneous expiration of options and futures contracts on indices, as well as stock options, a so-called “three witches” event often responsible for significant price movements linked to the closing of certain positions.
A WALL STREET
Wall Street eroded in mid-session on profit-taking, with the Dow Jones and S&P 500 closing at records on Thursday, while the absence of new indicators does not give a clear direction.
At the time of the European closing, trading on the New York Stock Exchange indicated a decline of 0.24% for the Dow Jones, against 0.4% for the Standard & Poor’s 500, and 0.78% for the Nasdaq Composite.
VALUES
The automotive sector fell on the stock market on Friday, in the wake of Mercedes-Benz, which fell by 2.35%, the German manufacturer having lowered its annual margin outlook on Thursday, against a backdrop of macroeconomic weakness in China.
Forvia fell 8.51%, Valeo 4.9%, while Renault and Stellantis fell 3% and 3.3% respectively.
The luxury sector fell by 2.85% in Europe after the latest decision by the Chinese central bank, while Jefferies analysts explained in a note that they do not expect conditions to improve in the second half of 2024.
Burberry fell 3.608%, trailing the FTSE, after Jefferies cut its recommendation on the group.
Dr. Martens fell 18.721% to a record low after Goldman Sachs sold 70 million shares in the group at a 9.8% discount to its previous closing price.
Alten lost 3.95% after lowering its organic growth forecast for 2024 again on Thursday, saying it expected a slowdown in activity in the second half of the year following the postponements and shifts of many projects in Europe.
RATE
Yields rose on Friday as investors worried about the cooling in labor markets that the Fed’s 50 basis point cut suggests.
The yield on the German ten-year bond rose 2.7 bp to 2.22%, while the two-year rate gained 3.8 bp to 2.253%.
At the time of the European closing, the yield on the ten-year Treasury rose 1.6 bp to 3.7565%, while the yield on the two-year note rose 3.5 bp to 3.6394%.
FOREXThe dollar remains near its lowest levels this year as the Fed’s monetary easing cycle begins.
The dollar gained 0.38% against a basket of benchmark currencies, the euro eroded 0.19% to $1.114, and the pound sterling lost 0.04% to $1.3279.
OIL
The Fed’s rate cut supported the barrel, which posted a gain over the week.
Brent fell by 0.28% to $74.67 per barrel, while American light crude (West Texas Intermediate, WTI) rose by 0.03% to $71.97.
(Written by Bertrand De Meyer)
