Europe: Shares post first weekly loss in four as banks weigh

European shares closed lower on Friday (29 Aug), hitting their lowest in over two weeks, weighed down by British banks, while investors assessed economic data in the US and the euro zone.

Natwest dropped 4.8 per cent, while Barclays and Lloyds shed 2.2 per cent and 3.4 per cent, respectively, as a think tank recommended Britain’s government should tax banks on the billions of pounds they receive in interest from the Bank of England on the reserves they hold at the central bank.

This weighed on the broader banks index, down 0.9 per cent. The index logged its sixth session of declines, its longest losing streak since October 2023.

The pan-European Stoxx 600 closed 0.6 per cent lower, registering its first weekly loss in four, with questions over the independence of the US Federal Reserve and political uncertainty in France weighing on the index. However, it rose for the second consecutive month.

Fed independence has come into focus as US President Donald Trump has stepped up his campaign to exert more influence over monetary policy, including his attempt to fire Governor Lisa Cook. Cook filed a lawsuit on Thursday saying Trump has no power to remove her from office.

Meanwhile, data showed the US Personal Consumption Expenditures Price Index rose 2.6 per cent in July on an annual basis, as estimated, suggesting a mild impact of tariffs on inflation.

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However, it is not expected to prevent the Federal Reserve from cutting interest rates next month against the backdrop of softening labour market conditions.

“It remains the base case that they (Fed) will cut interest rates in September, but the higher inflation reading does put a seed of doubt into that,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.

French Woes

Major regional bourses also closed lower, with Germany’s DAX down 0.6 per cent.

German inflation accelerated more than expected in August while unemployment topped 3 million for the first time in a decade. French consumer prices rose slightly less than anticipated in August.

European technology stocks lost the most, tracking US peers. ASML fell 2.7 per cent and SAP fell 1.9 per cent. Conversely, defence stocks were higher with the broader index up 0.4 per cent.

France’s CAC 40 has shed 3.3 per cent this week, lagging regional peers, on concerns over a potential collapse of Prime Minister Francois Bayrou’s government next month.

In September, the ECB is expected to keep rates on hold, mirroring its July meeting, after delivering eight rate cuts since mid-2024.

Renewable energy companies Orsted and Vestas Wind closed 3.3 per cent and 3.1 per cent lower, respectively. The U.S. administration said it was cancelling US$679 million in federal funding for 12 offshore wind projects.

Remy Cointreau fell 4.1 per cent, even as the French spirits maker raised its full-year 2025/26 profit outlook. REUTERS