By Shreyashi Sanyal and Bansari Mayur Kamdar
(Reuters) -European shares slipped on Friday, rounding off a lacklustre week that saw investors step to the sidelines ahead of crucial updates from the U.S. Fed and European Central Bank (ECB), while Croda slid on a tepid profit outlook.
The pan-European STOXX 600 index closed 0.2% down and ended the week 0.5% lower.
Investors feared that the Fed could opt for a hawkish stance in its meeting next week, while the ECB is expected to continue to tighten monetary policy.
Money markets now see a 73% chance that the Fed will skip raising interest rates in its June meeting but will resume rate hiking in July. For the ECB, traders see about a 98% chance of a 25-basis-point rate hike next week.
"Our view on the Fed is that they want to pause... We do however, expect the Fed to keep the door open for another hike in July," Mohit Kumar, a strategist at Jefferies, said.
"ECB is in a slightly different position as we do not believe that it is in the 'sufficiently restrictive territory' yet. We expect a rate hike in June followed by another in July and that should mark the end of the current rate hiking cycle."
Weakness in the rate-sensitive insurance sector and banks weighed on the STOXX 600, with the sectors down 0.5% and 0.4%, respectively.
Shares of Croda International tumbled 12.5% to the bottom of STOXX 600 after the British chemicals company forecast its annual pre-tax earnings to come in below expectations.
The broader European chemicals index fell 2.0%, leading sectoral declines. Chemicals also fell the most among major European sectors for the week, down 3%.
Orsted (OTC:DOGEF) gained 4.0%, lifting the utilities sector, as Goldman Sachs (NYSE:GS) raised its price target on the renewable energy group.
Vivendi (OTC:VIVHY) shed 2.4% after Euronext said it will be excluded from France's CAC 40.
French shoppers should pay less for their food from next month, Finance Minister Bruno Le Maire said on Friday, after he secured a pledge from 75 top food companies including Unilever (NYSE:UL) to cut prices on hundreds of products.