European stocks fall amid concerns about US inflation, economic recovery in Eurozone

(MENAFN) European Stocks closed lower on Friday, marking a decline throughout the week as ongoing US price pressures and signs of a recovery in the eurozone Economy cast doubt on the likelihood of multiple interest rate cuts from major central banks this year. The European STOXX 600 index fell by about 0.1 percent on Friday, resulting in a weekly loss of approximately 0.4 percent, the largest in three weeks.

Typically, lower interest rates provide cheaper financing for businesses and consumers, leading to increased business activity and higher profits. However, investors have become more cautious following warnings from European policymakers about the risks of monetary easing post-June. Policymakers are particularly wary of exacerbating price pressures, especially if the Federal Reserve continues to delay its own easing cycle.

Currently, traders expect the European Central Bank (ECB) to cut interest rates by 55 basis points, a decrease from the 67 basis points anticipated a week ago. Eurozone bond yields experienced their largest weekly rise in a month after a survey revealed that business activities in the eurozone expanded at the fastest pace in a year in May. Additionally, separate data confirmed that Germany's economy expanded in the first quarter of 2024.

Among the hardest-hit stocks were those less sensitive to economic cycles, such as utilities, healthcare, and food and beverages. Conversely, sectors more affected by economic cycles, including insurance and the automotive industry, were among the best performers. This sectoral performance underscores the varied impact of economic conditions and central bank policies on different parts of the market. 



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