Europe: Shares recover from three-week lows, but weekly momentum fizzles

Traders now expect about 39 basis points of cuts by December, a slight pullback from earlier bets of over 40 bps, according to LSEG data

European stocks clawed their way back from three-week lows on Friday (Sep 26), lifted by gains in financials and industrials, leaving the benchmark index more or less where it began the week.

The pan-European Stoxx 600 rose 0.8 per cent, and ended the week just 0.07 per cent higher.

Spanish stocks outperformed other regional markets, rising 1.3 per cent to close at a more than one-week high, with other major indexes also in positive territory.

Germany’s Munich Re and France’s Scor led European insurer stocks 2.1 per cent higher, snapping a three-day losing streak.

The construction and materials sector gained 1.1 per cent, with Ireland’s Kingspan up 1.2 per cent after brokerage Citigroup raised its price target. Shares of steel producers also rose after German business daily Handelsblatt reported that the European Commission plans to impose tariffs of 25 to 50 per cent on Chinese steel and related products.

The world’s second-largest steelmaker ArcelorMittal was up 2.6 per cent, while Aperam rose 2.2 per cent. Germany’s Thyssenkrupp added 3.5 per cent and Salzgitter gained 5.2 per cent.

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Tariffs back in focus

Healthcare stocks reversed earlier losses to end flat, a day after US President Donald Trump announced a new round of punishing tariffs, including a 100 per cent import duty on branded drugs.

“It was already priced in,” said Nabil Milali, multi-asset & overlay portfolio manager at Edmond de Rothschild Asset Management in Paris.

“A lot of investors were expecting these kinds of tariffs and it was partly reflected in valuations in the healthcare sector.”

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The sector is one of the worst performers in Europe so far this year, with a sharp decline in weight-loss drugmaker Novo Nordisk one of the biggest drags.

Trump also announced a 25 per cent levy on heavy-duty trucks, pushing the shares of Daimler Truck and Traton down more than 2 per cent each. US inflation data in line with expectations eased fears that sticky price pressures could see the Federal Reserve delay rate cuts.

Markets had been banking on aggressive easing this year but resilient economic indicators have tempered the optimism.

Traders now expect about 39 basis points (bps) of cuts by December, a slight pullback from earlier bets of over 40 bps, according to LSEG data.

UK’s InterContinental Hotels Group gained 4 per cent after JPMorgan double upgraded its rating to “overweight” from “underweight”. Italian fashion group Brunello Cucinelli extended on Thursday’s losses by another 1.7 per cent, rocked by a report from short-seller Morpheus Research.

Lufthansa rose 1.6 per cent after a Reuters report said that the airline is expected to announce several thousand job cuts on Monday. REUTERS