European Stocks Ease Off Records

European stocks closed marginally lower on Friday as tech stocks pulled back and pharmaceuticals retreated. The STOXX Europe 50 eased by 0.1% form yesterday's record high to 6,541 and the STOXX Europe eased 0.2% to 658. ASML dropped 0.2% to trim its sharp advance this week as markets continued to assess spending on AI infrastructure by hyperscalers, with both Anthropic and OpenAI set to undergo IPOs this year. Likewise, Infineon dropped 1.3%. Meanwhile, a negative session for European drug manufacturers saw Argenx and Sanofi fall 3.2% and 1.2%, respectively. In turn, banks and insurers were mostly higher despite a surge in European sovereign yields, especially in the long end of the curve, as the rhetoric that the Federal Reserve could allow higher inflation rates regained ground. Deutsche Bank and Intesa Sanpaolo gained nearly 1%, while Allianz and Munich Re jumped over 1% for the insurers.

The Stoxx 50 traded flat to slightly higher on Friday, remaining close to record levels and heading for a fourth consecutive weekly gain. The Stoxx 600 was also little changed but was on track for a modest weekly decline. Investors assessed stalled efforts to end the US-Iran conflict, with traffic through the Strait of Hormuz still limited. On the other hand, sentiment was supported by renewed interest in artificial intelligence stocks and cooling US inflation, which strengthened expectations that the Federal Reserve will refrain from raising interest rates next month. Most major stocks traded lower, including ASML Holding, HSBC, Novartis and Roche, which fell between 0.2% and 0.9%. In contrast, technology stocks regained momentum after last month’s selloff, supported by strong earnings from major companies. SAP rose nearly 5%, while Amadeus IT gained more than 2%. Shell also advanced over 0.5% as oil prices moved higher.

European equity markets were set to open higher on Friday as softer-than-expected US inflation data eased concerns over an imminent Federal Reserve interest rate hike. Marekts are now assigning around a 35% probability to a 25 basis point Fed rate increase in September, compared with 55% a week earlier. Renewed demand for artificial intelligence-related stocks also supported broader risk sentiment across global markets. In Europe, investors will focus on the latest Eurozone GDP, employment and trade data, alongside German wholesale prices and French inflation figures. Meanwhile, no major earnings reports are scheduled in Europe on Friday. In premarket trading, futures for the Euro Stoxx 50 and Stoxx 600 were both up around 0.2%.