PARIS (Reuters) – European stocks ended sharply lower on Friday, with markets worried about the U.S. economic outlook as employment weakened in the United States.
In Paris, the CAC 40 lost 1.61% to 7,251.8 points, while the German Dax fell by 2.44% and the British Footsie by 1.31%.
The EuroStoxx 50 index ended the session down 2.76%, compared to 2.86% for the FTSEurofirst 300 and 2.82% for the Stoxx 600. Over the week, the CAC 40 fell by 3.54% and the Stoxx 600 by 3.01%.
The US employment report for July confirmed economists’ fears on Friday, with many indicators suggesting a weakening of the labour market in recent days.
This slowdown in hiring puts the Federal Reserve back at the forefront of market concerns: the central bank should now focus more on the stability of employment in the United States rather than on price dynamics, which are slowly coming back under control.
Operators now expect more than 110 basis points of rate cuts, and believe that a 50 basis point cut is possible in September or November.
“As we look at all the jobs reports that have come out this week, we are seeing a faster-than-expected deterioration in U.S. employment. This will increasingly fuel the rhetoric of a ‘hard landing’ rather than a ‘soft landing,'” said John Plassard, director at Mirabeau.
Despite the knee-jerk reaction of the markets, we will have to wait until the Jackson Hole symposium at the end of August to obtain more information on the central bank’s positioning.
The slide in technology stocks, triggered by investors’ sudden risk aversion and fueled by disappointing figures from Amazon and Intel, added to the pressure on European indices.
The significant decline is explained to a lesser extent by geopolitical uncertainties, with investors positioning themselves for possible armed action by Iran or Hezbollah this weekend, when markets close.
RATE
Yields fell in Europe and the US as investors sought safe-haven assets while the trajectory of US rates supported sovereigns.
At the close of the European rate markets, the yield on the 10-year Treasury fell by 16.1 bp to 3.8204%, and hits its lowest level since December during the session, compared to 27.5 bp for the two-year rate, at 3.89%, more sensitive to Fed rates. The yield is at its lowest level since May 2023.
The yield on the German ten-year dropped 7 bp to 2.167%, while that of the two-year rate fell 9 bp to 2.347%.
A WALL STREET
Wall Street fell mid-session, under the combined pressure of falling technology stocks and the poor employment report.
At the time of the European closing, trading on the New York Stock Exchange indicated a drop of 2.25% for the Dow Jones, against 2.3% for the Standard & Poor’s 500, and 3.1% for the Nasdaq Composite.
VALUES
The banking sector continued its decline that began on Thursday, and fell by 4.35%. Poor results this week and falling bond yields put pressure on banks. Societe Generale fell 6.16%, Credit Agricole 5.62% and BNP Paribas 2.93%.
Technology fell 5.97% after poor results from Intel and Amazon, and in a broader context of risk aversion. ASML dropped 11.41%, ASM International 13.81%, BE Semiconductor lost 9.68%, Infineon 5.4% and Aixtron 3.59%. In Paris, STMicroelectronics and Soitec declined 5.83% and 3.53%.
Engie raised its annual outlook on Friday, supported by a good first half in a context of a return to normal in energy market conditions, and gained 2.38%.
AXA rose 1.19% as the group posted better-than-expected results, while BNP Paribas said on Thursday it had entered into exclusive negotiations to acquire 100% of AXA Investment Managers.
IAG rose 4.09% after beating expectations for second-quarter profit and dividend, as the British airline also announced it had withdrawn its takeover bid for Spain’s Air Europa.
CHANGES
The dollar is falling against the euro as investors bet on a narrowing of the interest rate gap between the United States and the eurozone in the coming months.
The dollar lost 1.2% against a basket of benchmark currencies, while the euro jumped 1.2% to $1.0921. The pound gained 0.52% to $1.2805.
OIL
Geopolitical tensions are not enough to support oil, with markets worried about the weakness of the US economy.
Brent fell by 3.45% to $76.78 per barrel, while American light crude (West Texas Intermediate, WTI) fell by 3.84% to $73.38.
TO BE CONTINUED MONDAY:
(Written by Corentin Chappron, edited by Sophie Louet)
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