European Shares Fall for Fifth Straight Session

By Shubham Batra and Lisa Pauline Mattackal
(Reuters) – European shares fell for a fifth straight session on Friday in their worst day since early August, following a mixed U.S. jobs report that influenced expectations for a potential Federal Reserve rate cut later this month.

The pan-European STOXX 600 index declined 1%, ending a four-week winning streak and posting a 2.5% loss for its worst weekly performance since the week ending Aug. 2.

Data indicated that U.S. employment increased less than anticipated in August, possibly reducing the likelihood of a 50-basis-point rate cut—contrary to earlier expectations. However, the unemployment rate decreased.

As of 1611 GMT, traders were pricing a 23% chance of a 50 bp rate cut, although this briefly surged above 51% after the jobs data, according to the CME’s FedWatch tool.

Michael Brown, senior research strategist at Pepperstone, stated: “Over the next couple of weeks … markets will continue to trade choppy, and volatility will remain high because it is genuinely a coin flip in the markets regarding the next Fed meeting.”

In Europe, major country indexes fell by about 1%, with Germany’s DAX index dropping 1.6% to a two-week low after reports indicated a 2.4% decline in industrial production for July, significantly worse than the predicted 0.3% drop.

The technology, basic materials, and energy sectors were the largest contributors to the STOXX 600’s decline, all falling over 2%. Chip stocks negatively affected the tech sector, following low performance reported by Broadcom (NASDAQ:AVGO).

Commodity stocks faced pressure from falling oil and metal prices, while the rate-sensitive bank sector retreated 1.8%. Conversely, the rate-sensitive real estate sector rose 0.6%, reaching its highest point since August 2022.

Additionally, euro zone GDP growth for the second quarter was revised down to 0.2%, from an earlier estimate of 0.3% growth.

Next week, the European Central Bank is expected to ease rates by 25 bps. However, European markets are likely to take cues from the U.S., as inflation data is anticipated to be a significant driver.

“The Fed is absolutely the main driving force at the moment, with markets having already discounted that policy path for the ECB while having a very uncertain outlook for the Fed,” Brown explained.

Among individual stocks, Volvo (OTC:VLVLY) fell 5.7% after the Swedish automaker reduced its margin and revenue targets for the second time this year during its capital market day.

In contrast, Poland’s InPost surged 11.7% to the top of the STOXX 600 after reporting a 29% increase in second-quarter earnings.