by Pauline Foret and Mara Vilcu
(Reuters) – European stock markets ended lower on Friday, weakening under pressure from bond yields as investors reconsider their plans for Federal Reserve (Fed) rate cuts in 2025 after the strong monthly report on the American employment.
In Paris, the CAC 40 ended down 0.79% at 7,431.04 points. The British Footsie closed with a decline of 0.86% and the German Dax 0.47%.
The EuroStoxx 50 index fell by 0.8%, the FTSEurofirst 300 by 0.79% and the Stoxx 600 by 0.83%.
The European indices, which were moving in scattered order at mid-session, weakened after the publication of the monthly report from the American Department of Labor, which showed that the American economy had created 256,000 jobs in December, much more than the 160,000 creations predicted by analysts.
Enough to reinforce expectations of a very cautious bias from the Fed on the rate cuts planned for 2025.
Financial markets now expect the US central bank to wait until June to make a further reduction and then refrain. Before the employment statistics, they expected for 2025 a first drop in May, potentially followed by a second reduction before the end of the year.
These new bets are pushing up bond yields on both sides of the Atlantic, putting pressure on equity markets and fueling the dollar rally.
“The rise in yields seems set to continue, which is bad news for the equity markets. Could we really achieve a 5% yield on the ten-year Treasury bond? Any hope of a The quiet start to the year has now well and truly disappeared,” commented Neil Birrell, chief investment officer at Premier Miton.
RATE
Galvanized by expectations of less monetary easing from the Fed, American bond yields are climbing, even if the increase tends to moderate.
The rate on 30-year US government bonds rose almost 2.9 points to 4.9501%, after briefly exceeding the 5% mark for the first time since October 2023.
The yield on ten-year Treasuries gained 6.2 bps to 4.7428%, while that at two years – the most sensitive to fluctuations in the monetary policy trajectory – gained 10.9 bps to 4.3708%.
In Europe, the ten-year German Bund rate, the benchmark for the euro zone, ended with a gain of 3.5 bp at 2.567% after reaching a session high since July, at 2.597%.
CHANGES
In the wake of US bond yields, the dollar climbs after the publication of employment statistics in the United States.
The greenback gained 0.35% against a basket of reference currencies, while the euro lost 0.46% to 1.0251 dollars, falling to its lowest level since November 2022.
The pound sterling also fell by 0.57% against the dollar, further penalized by concerns about British public finances.
VALUES IN EUROPE
In Copenhagen, Ambu A/S takes first place in the Stoxx 600 with an increase of 17.3% after raising its outlook for 2025.
In Paris, Ubisoft is absorbing its losses after falling by more than 7%, the French group having once again postponed the release of the last game in its Assassin’s Creed series.
A WALL STREET
Bending under the pressure of Treasury bond yields, the main American indices are down sharply at mid-session.
At closing time in Europe, the Dow Jones fell by 1.53%, the S&P 500 by 1.62% and the Nasdaq by 1.9%.
On the value side, Delta gained 9.98% after declaring on Friday that it expects 2025 to be the most profitable year in its history, thanks to strong demand for its “premium” tickets and the improvement in the power of setting prices in the sector.
Other American airlines are climbing in its wake: American Airlines, United Airlines and Alaska Air are gaining between 2.7% and 5.35%.
Nvidia fell 3.46% after the publication of press information according to which the Biden administration could impose new restrictions on exports of chips used for artificial intelligence.
OIL
Crude prices soar more than 2% to their highest levels since October, as traders try to assess potential supply disruptions after the imposition of new US sanctions on Russian oil.
Brent gained 2.89% to $79.14 per barrel and American light crude (West Texas Intermediate, WTI) was up 3% to $76.14.
TODAY’S INDICATORS
In addition to the US employment report, investors took note of the University of Michigan consumer confidence index which stood at 73.2 in January, according to preliminary data released this Friday, while analysts were expecting 73.8.
(Edited by Blandine Hénault)
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