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.
European Market Performance
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.
Sector Performance
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.
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.
Global Developments
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.
Conclusion
Despite the dip, the European stock market ended the week on a positive note, with the Stoxx 600 index rising 1.3 per cent over the week, marking its fifth consecutive weekly gain. The market was buoyed by the lack of specific details in US President’s tariff-related announcements and the anticipation of next week’s ECB policy decision.
FAQs
Q: Why did European shares pull back from their record highs?
A: European shares pulled back from their record highs due to declines in the telecom and energy sectors, while rising bond yields added downward pressure.
Q: What was the performance of the Stoxx 600 index?
A: The Stoxx 600 index lost steam, closing unchanged at 530.07 points, despite rising 1.3 per cent over the week, marking its fifth consecutive weekly gain.
Q: What was the impact of President Trump’s recent tariff-related announcements on the market?
A: The lack of specific details in President Trump’s tariff-related announcements had a positive impact on the market, with investors feeling less uncertain about the outlook for the eurozone economy.
