European equities experienced a significant weekly decline, with the pan-European STOXX 600 index falling 2.5% and ending a four-week gain streak. According to TradingView News, the index declined 0.5% to 611.04 points as of 0715 GMT on Friday, marking a more than two-week low. Most regional markets also declined, with Spain's benchmark index falling 1.1% and France's down 0.8%. The sharp weekly loss was driven by investor concerns about risks to growth and inflation due to energy supply disruptions from the Middle East conflict, which has now stretched to around eight weeks with Washington and Tehran still at an impasse. As reported by Proactive Investors, London's blue-chip index has been called 77 points lower in futures markets, with the FTSE 100 down 78 points at 10,379 on Friday, marking a fifth straight session of decline and hitting a more than two-week low. The latest data shows the FTSE 100 fell more than 0.5% on Friday, with the index down around 2.4% for the week.
Most sectors traded in negative territory during Friday's session, with aerospace and defence stocks leading losses, falling 2.4%. However, the technology sector stood out as the only major gainer, rising 0.7% driven by a sharp rally in SAP shares. As reported by TradingView News, SAP surged 5.5% after the company reported first-quarter profit above estimates, supported by strong growth in its cloud business. Germany's DAX index outperformed other major European benchmarks and edged up 0.1%, largely supported by the strong SAP performance. Healthcare shares and financials lost 1.7% and 1% respectively. Novo Nordisk bucked the trend, adding 5.4% after rival Eli Lilly's obesity pill trailed prescriptions to Novo's oral Wegovy. According to Proactive Investors, British American Tobacco is top risers, up 3.45%, followed by BT Group and Unilever, while medical names are a big drag, with AstraZeneca, Smith & Nephew, and ConvaTec all down. Pharma stocks also weakened, with AstraZeneca down 3.7% and GSK falling 2.7% ahead of upcoming earnings. Defence names were under pressure, including BAE Systems (-3%), Babcock (-4.3%) and Rolls-Royce (-2.5%). Major banks such as HSBC, Lloyds, Barclays and NatWest declined by around 0.8-1.1% ahead of results next week. On the upside, Unilever (1.1%) and British American Tobacco (2.6%) gained, and oil majors Shell (0.4%) and BP (0.2%) edged higher.
Benchmark Brent crude remained above $100 per barrel, with energy prices remaining severely disrupted by the Middle East conflict. According to TradingView News, the Strait of Hormuz stayed effectively shut, raising concerns about global energy supply disruptions and adding pressure on inflation expectations. The latest developments show Brent crude futures are up 0.4% this morning at $105.53 a barrel, with Iran saying the Strait of Hormuz cannot be opened due to ceasefire breaches. As reported by Proactive Investors, oil prices are consolidating near the $100 per barrel level, with developed market yields rising alongside oil prices, fueling inflation expectations. BP PLC and Shell PLC both added over 1% on the elevated oil price, while International Consolidated Airlines Group SA (IAG) is off around 2.5%, tracking weakness across European airline stocks as the sector grapples with mounting disruption. Energy and consumer stocks outperformed amid elevated oil prices, with oil majors Shell (0.4%) and BP (0.2%) edging higher.
Markets are pricing in a 76% chance that policymakers will leave rates unchanged when the European Central Bank meets next week, as reported by The Economic Times. However, traders still expect rate hikes later this year if energy disruptions persist. Luca Bindelli, head of investment strategy at Lombard Odier, noted that with the ECB's focus on inflation expectations and fears that war-related effects could push companies to pass on costs, the ECB is likely to eventually want to raise rates, which they'll then have to roll back in 2027. Deputy governor for financial stability Sarah Breeden told the BBC that current share prices weren't fully reflecting the economic pressures building in the background, a comment that AJ Bell investment director Russ Mould says may have contributed to some of the FTSE 100's decline. According to UBS equity strategist Matthew Gilman, UK equities have a "supportive backdrop" with valuations at "reasonable" levels at 13.2x forward P/E versus the median since 1990 of around 12.8x, with UBS setting their target for the FTSE 100 index at 10,500-11,000 by the end of 2026. Bank of England policymaker Sarah Breeden warned that global equities may face a correction, saying current valuations do not fully reflect risks such as a potential economic slowdown, stress in private credit markets and possible AI driven repricing. On the data front, UK retail sales rose 0.7% in March, beating expectations, with a 0.2% increase excluding fuel.
According to The Economic Times, Mark Haefele, chief investment officer at UBS Global Wealth Management, stated that opportunities still exist in sectors less sensitive to higher energy prices, such as healthcare, and areas supported by secular trends, such as industrials. Haefele added that he did not expect higher energy prices to trigger a recession. European equities had outperformed U.S. markets at the start of the year but have lagged during the war on concerns over the continent's vulnerability to higher energy prices. The euro remained relatively stable against major currencies on Friday, as investors balanced geopolitical risks with expectations around economic resilience in the eurozone, with currency markets showing limited volatility. As reported by UBS, the overall macro backdrop remains constructive, supported by easing tariff headwinds, expected Fed rate cuts, supportive fiscal policies, and a recovery in manufacturing, with UBS recommending maintaining diversified exposure to transformational themes such as AI, Power and resources. Mondi dropped around 10% after warning that higher energy, raw material and logistics costs tied to the Middle East conflict are weighing on its outlook, highlighting the direct impact of geopolitical tensions on corporate earnings.
