European shares drifted higher on Friday and looked set to register small gains for an eventful week marked by crucial central bank decisions including the U.S. Federal Reserve’s widely expected interest rate cut.
The pan-European STOXX 600 edged up 0.3% to 556.72 points, as of 0844 GMT, with rate-sensitive banks gaining 1.1%.
Automobiles and parts also rose 1.2% and led gains among sectors as Stellantis gained 4% after Berenberg upgraded the carmaker to “buy” from “hold”, citing better U.S. inventory and upcoming product momentum for the broader sector.
The Fed cut rates by 25 basis points for the first time since December.
The dovish move helped riskier assets broadly, while technology stocks in Europe also saw renewed interest this week following losses in the previous two months.
The sector is set for weekly gains of 5.3% – its largest in a year – underpinned by advances in German software maker SAP following upbeat comments from Jefferies’ analysts. A $5 billion deal between Intel and Nvidia across the Atlantic also aided sentiment.
“The tech story remains really important just for the health of this rally globally. There’s so much investment going into this space. Investors seem to be willing to bet that investments will prove to be productive,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
The day’s gains put the broader STOXX on track for weekly gains, although equities have been trading in a tight range on looming worries around elevated sovereign debt levels and the impact of U.S. tariffs.
The European economy has been faring “better than expected so far in light of some of the tariffs. But is that going to keep going …will be a big question for investors,” Ganesh added.
The next catalyst could potentially be a boost from the much waited fiscal spending by regional governments. On Thursday, Germany approved the nation’s first annual budget since loosening fiscal rules.
Tyre maker Continental jumped 32.51% a day after spinning off Aumovio. The auto parts and components supplier gained 5.3%.
Kuehne+Nagel slid 7.1% after Deutsche Bank cut its rating on the Swiss logistics group to “Hold” from “Buy” earlier.
European logistics companies Maersk and Hapag-Lloyd dropped 4.6% and 2.6%, respectively, as analysts flagged a sharp drop in container freight indices and warned U.S. port volumes could soften.
UK’s Close Brothers slid 4.2% after the lender said it would delay its preliminary 2025 results by a week.
Following the Fed, Norway’s central bank also lowered rates by 25 bps, while the Bank of England left borrowing rates unchanged this week.
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