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European markets end week with broken bones: is the party over?



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Main U.S. indexes modestly red; Dow off ~0.3%

Industrials weakest S&P 500 sector; Comm Svcs leads gainers

Euro STOXX 600 index falls ~1% on the day, ~2.4% for the week

Dollar up; gold adds ~1%; bitcoin off ~1%; crude ~flat

U.S. 10-Year Treasury yield dips to ~4.22%

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EUROPEAN MARKETS END WEEK WITH BROKEN BONES: IS THE PARTY OVER?

The European markets faced a hard blow this week, with the benchmark STOXX 600 .STOXX marking its biggest weekly drop since last October while investors were watching with bated breath the political turmoil in France after the EU elections and the U.S. Federal Reserve's monetary policy update.

"There is no stopping flows out of European stocks, particularly in France, as investors re-allocate to US mega caps", said Axel Rudolph, senior market analyst at IG.

France's CAC .FCHI suffered the biggest weekly losses of Europe's major indexes, dropping by 6.2%, followed by Italy's FTSE .FTMIB, which fell almost 6%.

Declines in Spain's Ibex .IBEX, Germany's Dax .GDAXI and UK's FTSE .FTSE were more contained, sliding 3.6%, ~3% and 1.2%, respectively.

Across sectors, banks came out with broken bones, reflecting higher French government bond spreads, "rocked by fears that the next government will worsen France's fiscal position and send debt to dangerous levels", said Fiona Cincotta, senior market analyst at City Index.

Shares in BNP Paribas BNPP.PA, Societe Generale SOGN.PA and Credit Agricole CAGR.PA lost between 12-16% in value this week, the most since the banking crisis of March 2023.

"The banks have completed most of this year's funding plans and are likely to wait for calmer markets to proceed. However, there is a risk of higher funding costs longer term regardless of the outcome of the elections given the fiscal position of France but to a varying degree", said RBC analysts.

European carmakers also had a nervous week, hit by retaliation fears after the European Commission announced new tariffs on imported Chinese electric vehicles.

While investors await next central banks' moves, following Federal Reserve's hawkish tone this week, analysts believe that a climate of uncertainty is likely to continue into next week, keeping demand for stocks and the euro under pressure.

However, Morningstar's European market strategist Michael Field pointed to a euphoria that had dominated the markets until recently.

"Europe has come off, but the STOXX 600 is just 3% off its all-time highs. So, while political instability is influencing some select French stocks, I don't believe the market is really pricing anything in here yet for the overall European market", he said.


(Matteo Allievi)

*****



FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:


FRIDAY DATA: CONSUMERS GROW GRUMPIER, TRADE PRICES COOL - CLICK HERE


S&P 500, NASDAQ LOOK TO TAKE A BREATHER FROM THE RALLYING - CLICK HERE


BREADTH CHECK HAS NASDAQ, S&P 500 WHEEZING - CLICK HERE


M&A ACTIVITY: REBOUNDING AND STILL FRIENDLY - GS - CLICK HERE


NOT YET TIME TO BUY THE DIP - CLICK HERE


TECH STOCKS STILL PROPPING UP MARKETS - CLICK HERE


OATs SPILLOVER EFFECTS - CLICK HERE


STOXX 600 SLIPS, FRANCE'S CAC 40 PLUNGES FURTHER - CLICK HERE


EUROPEAN FUTURES INDICATING SMALL REBOUND, FRANCE STRUGGLING - CLICK HERE


BOJ'S DOVISH SURPRISE, AI AND THE POPE - CLICK HERE








UMich vs consumer spending https://reut.rs/3VHmVDk

UMich inflation expectations https://reut.rs/3Xnh47y

Import export prices and the dollar https://reut.rs/45mgI2Z

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