European stocks experienced declines on Friday morning, influenced by a mix of central bank decisions and economic data releases that kept investors cautious.
The pan-European Stoxx 600 index extended its losses to 0.85% by 11 a.m. London time, with particular weakness observed in the banking sector, which saw a substantial decline of 1.8%.
One of the notable movers was Carlsberg, whose shares plummeted by 8% following the confirmation from U.K. soft drinks maker Britvic that it had rejected two takeover proposals from the Danish beverage giant. Britvic justified its decision by stating that Carlsberg’s latest offer of 1,250 pence per share “significantly undervalues” the company. In response to this development, Britvic shares surged by 11%.
Equity markets in Europe appeared to be recovering from the negativity of the previous week, which was marked by significant gains for populist and far-right parties in the European Union Parliament elections. Even France’s CAC 40 index was on track to end the week with gains, rebounding after initial volatility triggered by the country’s political landscape and upcoming elections. However, the euro remained under pressure as investors monitored the potential outcome of the elections, particularly the implications of a possible far-right victory in France, the euro zone’s second-largest economy.
Market sentiment was also influenced by central bank actions. The Swiss National Bank (SNB) announced a reduction in interest rates by 0.25 percentage points to 1.25%, marking its second rate cut of the year. This decision positioned the SNB as the first major central bank to implement rate cuts in the current economic cycle, initially starting back in March.
On the other hand, the Bank of England opted to maintain its key interest rates unchanged at 5.25%, holding steady at a 16-year high despite recent easing of inflation to its 2% target. Economists detected a dovish tone in the Bank of England’s latest communications, describing the decision as “finely balanced.” However, by Friday, money market expectations for an August rate cut had receded to around 40%.
In economic data releases, British retail sales volumes for May posted a robust increase of 2.9%, surpassing expectations of a 1.5% rise and rebounding from a lackluster performance in April attributed to adverse weather conditions. This recovery in retail sales was seen as a positive signal for retailers heading into the summer months, which are expected to benefit from major sporting events such as the EUROs and the Olympics.
Additional economic indicators released on Friday included stable French business confidence for the third consecutive month, along with flash purchasing managers’ index (PMI) figures from Germany and the UK. These PMI figures indicated a slight slowdown in the recent upswing in business activity across these economies.
In the broader global context, Asia-Pacific markets experienced declines on Friday following the release of Japan’s May core inflation data, which came in slightly lower than anticipated. Meanwhile, U.S. stock futures indicated a muted start to trading, reflecting cautious sentiment amid ongoing global economic developments.
Overall, the European stock markets navigated a complex landscape on Friday, influenced by a combination of geopolitical uncertainties, central bank policies, and economic data releases that collectively shaped investor sentiment and market dynamics.