Europe's primary stock index ended a five-day winning streak on Tuesday, influenced by significant declines in energy stocks. Investors are evaluating domestic economic data and preparing for the central bankers' meeting in Jackson Hole this week. The pan-European STOXX 600 index finished 0.5% down, reversing initial gains and retreating from a nearly three-week high reached earlier in the day. All regional exchanges also moved into negative territory.
A drop in oil prices initially pushed the energy sector down by 2%, reaching an over one-week low, although prices recovered somewhat later in the day. A Reuters survey indicates that European shares are expected to rise slightly by year-end, due to potential central bank interest rate cuts, despite strategists' cautious outlook for the region's largest companies. Both the STOXX 600 and blue-chip STOXX50E have risen over 7% this year, having navigated recent volatility that briefly pushed the benchmark index below the critical 500-point threshold at the beginning of the month due to concerns about a potential U.S. recession.
OCBC strategists noted that the 'Goldilocks' theme and expectations of the Fed nearing a policy pivot are driving risk-on sentiment. They also mentioned that a mild unwinding of risk-on positions could occur as the week progresses. Investors are now focusing on the minutes from the Federal Reserve's July policy meeting, scheduled for Wednesday, and comments by Fed Chair Jerome Powell at the Jackson Hole conference on Friday. Any indications of U.S. rate cuts could provide a new boost to global risk assets, despite recent easing of concerns about the world's largest economy.
Among significant individual movers, SalMar fell 7.4% after the Norwegian salmon farmer reported operating profit below estimates and reduced its Iceland harvest outlook. BT dropped 6.4% as its partner, TV company Sky, plans to launch broadband services on CityFibre's network, impacting the telecom giant. Danish medical equipment maker Coloplast lost 5% following its third-quarter earnings report. Luxury and automobile stocks were among the few bright spots.
In Sweden, the central bank reduced its key rate as anticipated and suggested it could accelerate policy easing if price pressures do not increase, hinting at up to three more cuts before year-end. However, Swedish shares fell 0.5%, ending a five-day winning streak. On the data front, German producer prices fell by 0.8% year-on-year in July, as expected.
