European Stock Markets Dip Amid Interest Rate Concerns

European stock markets declined on Friday, mirroring the global negative sentiment driven by worries over sustained high interest rates and their potential impact on economic activity.

Market Performance

At 03:10 ET (07:10 GMT), the DAX index in Germany traded 0.9% lower, the CAC 40 in France fell 0.6%, and the FTSE 100 in the U.K. dropped 0.9%. European equities followed the trend set by Asian markets and Wall Street, where the Dow Jones Industrial Average experienced its worst session in over a year, plunging more than 600 points.

Global Sentiment and Inflation Concerns

This market downturn came after the Federal Reserve’s recent meeting minutes suggested that U.S. interest rates might remain high for an extended period. These concerns were compounded by several Federal Reserve officials issuing warnings about persistent inflation. Similarly, the Nikkei index in Japan fell by over 1% on Friday.

European Central Bank and UK Inflation

While the European Central Bank is expected to reduce interest rates in June, unexpected high inflation in the U.K. earlier this week has posed challenges for the Bank of England. Adding to the economic woes, data released on Friday showed British retail sales fell by more than anticipated in April, decreasing by 2.3% month-on-month due to adverse weather affecting clothing retailers and sports stores.

In the corporate sector, British fund manager Abrdn (LON:ABDN) saw a 1% rise in its stock price following the announcement that CEO Stephen Bird will step down after four years, with finance chief Jason Windsor stepping in as interim CEO.

Crude prices stabilized on Friday but were on track for significant weekly losses. Concerns over U.S. economic activity, sticky inflation, and high interest rates have weighed heavily on the market. By 03:10 ET, U.S. crude futures (WTI) traded 0.1% lower at $76.79 per barrel, and the Brent contract dropped 0.1% to $81.30 per barrel. Both contracts are set to post weekly losses exceeding 3%, with Brent at a two-month low and WTI at a three-month low.

OPEC+ Meeting and Future Outlook

All eyes are now on the upcoming OPEC+ meeting at the start of June, where the group of producers will discuss whether to extend voluntary oil output cuts of 2.2 million barrels per day. Additionally, gold futures rose 0.2% to $2,341.10 an ounce, while EUR/USD traded 0.1% higher at 1.0818, reflecting the cautious optimism among investors amidst ongoing economic uncertainties.