Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

European shares have worst day in a month as investors digest mixed US data

Published 09/06/2024, 03:26 AM
Updated 09/06/2024, 01:00 PM
© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 5, 2024.     REUTERS/Staff
DE40
-
STOXX
-

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, after a widely anticipated U.S. jobs report offered mixed signals on the size of a potential Federal Reserve rate cut later this month.

The pan-European STOXX 600 index fell 1%. The index also snapped a four-week winning streak, losing 2.5% in its worst weekly performance since the week ending Aug. 2.

Data showed U.S. employment increased less than expected in August, potentially decreasing the chance that the Fed might opt for a 50-basis-point (bp) - rather than a 25-bp - rate cut this month, though the unemployment rate slipped.

Investors saw just a 23% chance of a 50 bp rate cut as of 1611 GMT, though pricing briefly rose above 51% after the data, according to the CME's FedWatch tool.

"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 as to what's going to happen at that next Fed meeting," said Michael Brown, senior research strategist at Pepperstone.

In Europe, all major country indexes fell around 1%, with Germany's DAX index dropping 1.6% to a two-week low after data showed the country's industrial production fell by 2.4% in July, compared with analysts' prediction of a 0.3% drop.

The technology, basic materials, and energy sectors were the biggest drag on the STOXX 600, all falling over 2%. Chip stocks weighed on the tech sector, tracking declines in U.S. peers after tepid results from Broadcom (NASDAQ:AVGO).

Declines in oil and metal prices weighed on commodity stocks, while the rate-sensitive bank sector fell 1.8%. On a brighter note, the rate-sensitive real estate sector rose 0.6% to its highest since August 2022.

Also on the data front, euro zone GDP growth was revised to 0.2% for the second quarter from an earlier estimate of 0.3% growth.

Next week, the European Central Bank is widely expected to ease rates by 25 bps. European markets, however, are likely to take their cues from overseas, with U.S. inflation data expected to be the biggest mover.

"The Fed is absolutely the main driving force at the moment, with markets having already discounted that policy path for the ECB while you've got a very uncertain outlook for the Fed," Brown said.

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 5, 2024.     REUTERS/Staff

Among individual stocks, Volvo (OTC:VLVLY) Cars dropped 5.7%. The Swedish automaker slashed its margin and revenue ambitions for a second time in a year on Thursday at its capital market day.

Poland's InPost jumped 11.7% to the top of the STOXX 600, as it reported a 29% surge in second quarter earnings.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.