Europe’s benchmark stock index plunged to a more than two-week low on Friday. This is driven by a combination of factors, including hawkish comments from Federal Reserve officials, escalating tensions in the Middle East, and stronger-than-anticipated US jobs data.
The STOXX 600, representing the broader European market, declined by 0.9%, marking its most significant single-day drop since early February.
This decline contributed to a 1.2% weekly decrease, the worst performance since mid-January.
Sectors such as utilities, retail, and telecommunications were hit particularly hard, experiencing declines ranging from 1.6% to 2.2%.
Major benchmark indexes in key European economies, including Germany, France, Italy, and Spain, each fell by over 1%.
The unexpectedly robust US nonfarm payrolls data for March raised concerns that the Federal Reserve might delay anticipated rate cuts this year.
Federal Reserve policymakers also expressed a more hawkish stance before and after the release of the data.
Steve Sosnick, chief strategist at Interactive Brokers, noted, “The US employment strength shouldn’t move the needle too much for the ECB,” suggesting that the situation in Europe might be more conducive to rate cuts due to economic stresses in several European economies.
Since late 2023, optimism about potential rate cuts by both the European Central Bank and the Federal Reserve has been a key driver of global equity market gains.
Additionally, rising euro zone bond yields after the US jobs data further weighed on equities. Investor anxiety was reflected in the euro STOXX volatility index, which reached its highest level since November 2023.
European equities were already facing pressure from early trade due to hawkish comments from Fed officials and increased tensions in the Middle East.
Domestically, euro zone retail sales declined by 0.7% on an annual basis, a smaller drop than the 1.3% decline expected by economists.
