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Written by Ankika Biswas, Johann M Cherian, Ozan Ergenay
(Reuters) – European stocks tumbled a week in early trading on Friday as rising tensions in the Middle East dented some of the optimism sustained after the European Central Bank hinted at an impending interest rate cut. After hitting a record high, it leveled off.
The pan-European market closed 0.1% higher after rising 1.2% during the day, but fell for the second week in a row.
After an early trade rebound, benchmark indexes in major countries such as Germany and France closed in the red, while those in Italy and Spain closed at their highest levels for the day.
The Euro STOXX volatility index rose to its highest level since October, reflecting concerns among some investors.
Automobiles and travel and leisure led the sectoral decline, while the energy sector rose 2.4%, its highest level since 2008, due to higher oil prices, geopolitical risks and global economic uncertainty.
“It all smells of geopolitical risk. There’s more of a risk-off movement now,” said Andreas Bruckner, European equity strategist at BofA Global Research.
Luxury giants LVMH and Richemont were down 1.2% and 3%, respectively, weighing on the STOXX600 index. The overall luxury goods sector fell 1.3%, to its lowest point in nearly two months.
Meanwhile, investors took some comfort in the fact that inflation rates in major euro zone countries such as Germany, France and Spain remained unchanged in March.
Optimism about interest rate cuts by major central banks this year has been boosting European stocks since late 2023, with the ECB hinting at the possibility of rate cuts as early as June.
As for other sectors, basic resources rose 2.4%, the highest in almost a year, as prices rose to their highest since June 2022.
Among the top gainers, Orsted (CSE:) rose 4.5%. Odd BHF upgraded the Danish renewable energy group to ‘outperform’ from ‘neutral’, while Evotech upgraded to ‘buy’ from ‘hold’ after Deutsche Bank upgraded the German biotech company to ‘buy’ from ‘hold’. It rose by .5%.
société generale Société Générale (EPA:) lenders have agreed to sell Marrocaine des Banks and La Marrocaine Vie to Moroccan conglomerate Saham Group for 745 million euros ($797.45 million). (OTC:) rose 2.1%.
Valta fell 31.1% after the German battery maker announced that its restructuring plan would prevent it from becoming profitable by 2026.
Zurich Insurance (S:) fell 3.8% as the Swiss group traded ex-dividend.
Chocolate maker Barry Callebaut fell 5.5% on Wednesday after surging nearly 12% in two days on higher first-half sales.
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