European shares fell for a fifth straight session on Friday (Sep 6) in their worst day since early August, after a widely anticipated US 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 per cent. The index also snapped a four-week winning streak, losing 2.5 per cent in its worst weekly performance since the week ending Aug 2.
Data showed US 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 per cent chance of a 50 bp rate cut as of 1611 GMT, though pricing briefly rose above 51 per cent 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 indices fell around 1 per cent, with Germany’s DAX index dropping 1.6 per cent to a two-week low after data showed the country’s industrial production fell by 2.4 per cent in July, compared with analysts’ prediction of a 0.3 per cent drop.
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The technology, basic materials and energy sectors were the biggest drag on the Stoxx 600, all falling over 2 per cent. Chip stocks weighed on the tech sector, tracking declines in US peers after tepid results from Broadcom.
Declines in oil and metal prices weighed on commodity stocks, while the rate-sensitive bank sector fell 1.8 per cent. On a brighter note, the rate-sensitive real estate sector rose 0.6 per cent to its highest since August 2022.
Also on the data front, eurozone gross domestic product growth was revised to 0.2 per cent for the second quarter from an earlier estimate of 0.3 per cent growth.
Next week, the European Central Bank (ECB) is widely expected to ease rates by 25 bps. European markets, however, are likely to take their cues from overseas, with US 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.
Among individual stocks, Volvo Cars dropped 5.7 per cent. 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 per cent to the top of the Stoxx 600, as it reported a 29 per cent surge in second quarter earnings. REUTERS
