Key Points
- After strong gains, European stock markets edged lower on Friday, reflecting on central bank decisions.
- The Federal Reserve initiated a 50-basis-point rate cut, with the Bank of England and others holding steady.
- German producer prices fell 0.8% in August, signaling inflationary easing in the eurozone.
- Oil prices declined slightly but remained on track for a second week of gains amid lower U.S. crude inventories.
European stock markets declined slightly on Friday, consolidating gains from the previous session, as investors analyzed several central bank decisions. By 04:36 AM ET, Germany’s DAX index fell 170.89 or 0.9% to 18,831.49, France’s CAC 40 dropped 68.80 or 0.9% to 7,546.61, and the FTSE 100 in the U.K. lost 43.86 or 0.5% to 8,284.73.
The week saw significant central bank activity, including a 50-basis-point interest rate cut by the Federal Reserve, signaling the start of a rate-cutting cycle to support the U.S. economy amid cooling inflation. Following the Fed’s move, other global central banks were cautious. On Thursday, the Bank of England and Norway’s Norges Bank opted to keep interest rates unchanged.
On Friday, the Bank of Japan also left rates steady as expected. Japan’s central bank highlighted its outlook for strong economic growth and a steady rise in inflation. China’s central bank, the People’s Bank of China, also kept its benchmark lending rate steady despite growing calls for additional stimulus to support its slowing economy.
In Europe, the European Central Bank (ECB) cut interest rates by 25 basis points following a similar move in June. ECB governing council member Fabio Panetta hinted that the ECB could quicken its rate-cutting pace, especially given the sluggish eurozone economy and the substantial interest rate cut from the Fed. Inflation data released on Friday showed a 0.8% drop in German producer prices for August, reinforcing that inflationary pressures in the eurozone are easing.
Meanwhile, the U.K. economy showed some positive signals, with retail sales growing by 1% in August, exceeding expectations. Growth in July was also revised upwards, adding to the optimistic outlook for British consumer spending.
Crude oil prices declined slightly on Friday, but Brent and U.S. crude futures were on course for a second consecutive week of gains. By 04:41 ET, Brent crude fell 0.56% to $74.54 per barrel, while Crude Oil Futures futures dipped 0.42% to $70.86 per barrel. The Fed’s interest rate cut spurred the recovery in oil prices, which helped calm concerns about weakening demand. However, lingering worries about demand, especially in China, prevented larger gains. U.S. crude inventories hit a one-year low last week, supporting the price rally.
