FX.co ★ European Markets Close Lower

European markets experienced a decline on Tuesday, largely driven by losses in the energy sector. Investors remained cautious due to uncertainties surrounding the region's economic growth prospects and potential interest rate adjustments by major central banks.

Market participants were particularly focused on the upcoming release of the Federal Reserve's latest monetary policy meeting minutes, and Fed Chair Jerome Powell's forthcoming address at the Jackson Hole Economic Symposium later in the week.

Amidst this backdrop, Sweden's central bank cut its key policy rate by 25 basis points, addressing easing inflation and weakening growth prospects. Additionally, the Riksbank signaled the potential for up to three more rate cuts this year. The policy rate now stands at 3.5%, following a previous reduction in May—the first since February 2016.

The pan-European Stoxx 600 closed 0.45% lower. The UK's FTSE 100 saw a 1% drop, while Germany's DAX and France's CAC 40 fell by 0.35% and 0.22%, respectively. Switzerland's SMI edged down by 0.07%.

Other European markets including Austria, Belgium, Denmark, Finland, Greece, Netherlands, Norway, Poland, Portugal, Sweden, and Turkiye ended on a weak note. Russia and Spain experienced marginal declines, whereas Iceland closed in positive territory.

In the UK market, BT Group plummeted nearly 6.5%, and JD Sports Fashion decreased by 4.4%. Major decliners comprised Shell, BP, Segro, Ashtead Group, Frasers Group, Airtel Africa, Vodafone Group, B&M European Value Retail, Whitbread, BAE Systems, Melrose Industries, Marks & Spencer, and HSBC Holdings, with losses ranging from 1.9% to 3%.

Conversely, EasyJet, Endeavour Mining, and Taylor Wimpey posted gains of 1% to 1.3%.

The German market faced losses with Siemens Energy, Rheinmetall, Bayer, and Sartorius dropping between 2.4% and 3.5%. Additionally, Fresenius Medical Care, Deutsche Bank, Adidas, Continental, and Commerzbank declined by 1.2% to 2%.

However, Henkel and E.ON recorded gains of 1.75% and 1.2%, respectively. Modest gains were seen in Zalando, BASF, Symrise, Beiersdorf, RWE, Mercedes-Benz, and Merck.

In France, Pernod Ricard and Teleperformance both declined by more than 2%, while TotalEnergies fell by 1.4%. Other weak performers included Eurofins Scientific, Orange, Kering, BNP Paribas, Bouygues, and Edenred. On the positive side, Renault surged nearly 1.5%, with Hermes International, STMicroElectronics, LVMH, and Unibail Rodamco also closing higher.

On the economic front, Eurostat confirmed that eurozone inflation edged up to 2.6% year-on-year in July, matching preliminary estimates and slightly above June's 2.5%. Core inflation remained sticky.

Another Eurostat report highlighted that Eurozone construction output increased by 1.7% month-on-month in June, reversing a 0.9% decline in May. This marked the first rise in four months and the quickest expansion since January 2023.

The European Central Bank reported a significant rise in the euro area current account surplus to EUR 51 billion in June from EUR 38 billion in May, its highest level since January 2013. This surge was attributed to improved goods trade and primary income.

In Germany, producer prices continued to fall due to weaker energy prices, but the rate of decline slowed. The annual decrease in producer prices was halved to 0.8% in July from 1.6% in June, in line with expectations.

Switzerland's foreign trade surplus shrank to CHF 4.1 billion in July from CHF 4.8 billion in June. In real terms, exports fell by 1.8% over the month, a sharper decline than June's 0.2% drop, while imports remained flat in July compared to a 0.8% increase in June.