European shares closed lower Friday, marking their first weekly decline in nearly two months, as concerns about potential interest rate hikes and a sell-off in defense stocks weighed on the market. The pan-European STOXX 600 index finished down 0.8% at 475.83,falling 1.3% over the week-its largest weekly drop since february.
The downturn reflects investor anxiety over the possibility that central banks, including the European Central Bank, may delay anticipated interest rate cuts due too persistent inflation. This uncertainty, coupled with profit-taking in sectors that had previously led gains, particularly defense, contributed to the broad-based selling pressure. The defense sector experienced a significant pullback after recent strong performance fueled by geopolitical tensions, with shares of Leonardo and BAE Systems both falling sharply.
London’s FTSE 100 slipped 0.4% while Paris’s CAC 40 and Frankfurt’s DAX both shed 0.9%. Spanish and italian shares saw more modest declines.Among individual stocks, Adidas rose 3.2% after the German sportswear giant raised its full-year outlook. However, this positive movement was offset by declines in other sectors.
The STOXX 600 had enjoyed a strong run in the first quarter, boosted by optimism about economic recovery and expectations of easing monetary policy. Analysts now caution that the path to lower interest rates may be more protracted than previously anticipated, potentially dampening economic growth and corporate earnings. Investors will be closely watching upcoming economic data releases,particularly inflation figures,for clues about the future direction of monetary policy.
