European Stocks Set to End Week on High Note Despite Friday Slump: What's Driving the Market

European shares are on track to end the week with robust gains, despite a muted performance on Friday. The pan-European STOXX 600 index was down 0.1% at 584.96, a day after it logged its best one-day performance in more than three weeks.

Market Overview

Major regional markets, including Germany's DAX and London's FTSE 100, traded in negative territory, with losses of 0.1% each. Most major sectors inched lower, with personal and household goods trading at the bottom. German sportswear retailers Adidas and Puma fell 0.7% and 2.2%, respectively, after U.S. peer Nike reported a drop in gross margins for the second consecutive quarter.

Key Drivers

On the flip side, banks gained 0.2% and were among the top gainers on the benchmark index. Market sentiment improved following Thursday's unexpected slowdown in U.S. consumer price inflation, strengthening expectations for Federal Reserve interest rate cuts in 2026. However, analysts cautioned against over-optimism, noting that the data was likely distorted downward by the recent government shutdown and should be interpreted with caution.

European Union Support for Ukraine

Meanwhile, European Union leaders decided to borrow cash to loan 90 billion euros ($105 billion) to Ukraine to fund its defence against Russia for the next two years, rather than using frozen Russian assets. This decision sent yields on German bonds higher.

Remember, this is a market perspective, not a prediction. It's essential to do your own research and consider multiple sources before making any investment decisions.

Key Takeaways