European shares pulled back from its record highs and ended flat on Friday (Jan 24), weighed down by declines in the telecom and energy sectors, while rising bond yields further added downward pressure.
The pan-European Stoxx 600 index lost steam, closing unchanged at 530.07 points. Despite this dip, the benchmark index rose 1.3 per cent over the week, marking its fifth consecutive weekly gain, its longest winning streak in nearly 10 months.
The telecommunications sector lost 2.8 per cent, led by a 12.7 per cent decline in Ericsson as the Swedish telecom equipment maker missed fourth-quarter profit estimates.
The energy sector lost 1 per cent, in tandem with oil prices.
Eurozone bond yields increased, with the yield on the German 10-year bund reaching as high as 2.569 per cent – its highest level in over a week.
Meanwhile, keeping losses at check, the personal and household goods sector rose 0.6 per cent, led by Burberry, which jumped 9.9 per cent, after the British luxury brand reported a smaller-than-expected drop in quarterly comparable store sales.
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Other luxury stocks were also up with Hugo Boss adding 3.9 per cent, Moncler jumping 3 per cent and Kering climbing 4.5 per cent. The Stoxx Luxury index was up 1.1 per cent.
Mining rose 1.2 per cent as it tracked a jump in metal prices.
This week, investors were buoyed by the lack of specific details in US President’s Donald Trump’s recent tariff-related announcements concerning the European Union and other major global partners.
Also contributing to the week’s gains, was the anticipation of next week’s European Central Bank (ECB) policy decision. With the rate cut already factored into the market, investors will be closely watching policymakers’ commentary on the future direction of interest rates for 2025.
“For now, President Trump has not materially changed the outlook for the eurozone economy. So, there is no reason to expect the ECB to change course at this juncture.
“Even though the ECB may be inclined to cut further in the coming months, we believe the ECB also wants to keep its flexibility,” said Bas Van Geffen, senior macro strategist at Rabobank.
Further boosting sentiments, Trump in his video address to the World Economic Forum expressed his demand that interest rates must drop immediately.
In a separate interview, the president said his recent conversation with Chinese President Xi Jinping was friendly and he thought he could reach a trade deal with China.
Eurozone business showed a modest return to growth as stable services activity in January was complemented by an easing of the long-running downturn in manufacturing.
German business activity stabilised in January, in a positive sign for Europe’s biggest economy which contracted for the second consecutive year in 2024.
Germany’s DAX index closed flat.
However, the two-year contraction pushed the German government to slash its growth projection for 2025 to 0.3 per cent, down from 1.1 per cent previously.
The rate-sensitive real estate sector lost 0.8 per cent.
MTU Aero dropped 6.5 per cent after the German engine manufacturer said Katja Garcia Vila to replace Peter Kameritsch as the next chief financial officer. REUTERS
