- European equities rose on Friday, positioning the Stoxx Europe 600 for a fifth consecutive monthly gain, its longest winning streak since early 2021.
- Investors awaited a keynote speech from Federal Reserve Governor Kevin Warsh at the Jackson Hole symposium, with markets pricing a roughly 70% chance of a U.S. rate cut in September.
- The Stoxx 600 added 0.4% in early trading, led by rate-sensitive real estate and technology shares, while Germany’s DAX touched a fresh record intraday high.
- Eurozone bond yields edged lower, with the German 10-year Bund yield falling 3 basis points to 2.41%, as traders positioned for dovish commentary from central bank officials.
- Energy stocks lagged as Brent crude slipped below $78 per barrel, while defensive utilities and healthcare provided support amid cautious trading volumes.
Jackson Hole in Focus as Rate-Cut Bets Firm
European stock markets extended their rally on Friday, with the pan-continental Stoxx Europe 600 climbing 0.4% in morning trade, putting the benchmark on course for a fifth straight monthly advance. The steady upward drift has been underpinned by growing conviction that major central banks, led by the U.S. Federal Reserve, are preparing to ease monetary policy in the coming weeks. According to CME Group’s FedWatch tool, futures traders now assign a probability of roughly 70% to a quarter-point rate cut at the Fed’s September meeting, up from about 50% a month ago.
The focus of the session was squarely on the Jackson Hole Economic Symposium in Wyoming, where Federal Reserve Governor Kevin Warsh was scheduled to deliver remarks later in the day. While Warsh is not currently a voting member of the Federal Open Market Committee, his speech was seen as a potential signal of the central bank’s policy trajectory heading into the autumn. Market participants were particularly attentive to any language regarding the balance of risks between inflation and employment, after recent U.S. data showed cooling price pressures alongside a modest softening in the labor market.
Regional Benchmarks and Sector Leadership
Germany’s DAX index outperformed its regional peers, rising 0.5% to touch a fresh intraday record high, buoyed by strength in industrial and software names. France’s CAC 40 added 0.3%, while the UK’s FTSE 100 lagged with a modest 0.1% gain, as a firmer pound weighed on the export-heavy index. Rate-sensitive sectors led the advance, with real estate stocks jumping 1.2% and technology shares climbing 0.9%, as investors bet on cheaper borrowing costs to support valuations in longer-duration assets.
Bond Markets and Currency Moves
Eurozone government bond yields drifted lower in tandem with the equity rally, with the German 10-year Bund yield falling 3 basis points to 2.41%. Peripheral spreads remained stable, with Italian 10-year yields hovering near 3.55%, as investors saw limited risk of political disruption following recent parliamentary votes in Rome. The euro traded slightly firmer against the dollar, changing hands near $1.0850, while the pound strengthened to $1.2750 ahead of UK retail sales data due later in the morning.
Corporate news was relatively thin, but a handful of earnings reports provided directional cues. Shares in Dutch semiconductor equipment maker ASML rose 1.5% after the company confirmed its full-year order book remained robust, while French luxury group LVMH gained 0.8% on reports of resilient demand from Chinese consumers. On the downside, Swedish telecom equipment maker Ericsson fell 2.3% after flagging softer-than-expected margins in its networks division, underscoring the uneven nature of the earnings season.
Looking ahead, market strategists cautioned that the recent rally has left valuations stretched, with the Stoxx 600 trading at roughly 15.5 times forward earnings, above its 10-year average of 14.2. A hawkish surprise from Warsh or other central bank speakers could trigger a sharp pullback, particularly in rate-sensitive sectors that have led the advance. However, with inflation continuing to moderate across the eurozone and the U.S., many investors remain positioned for a soft-landing scenario, in which gradual rate cuts support both equities and bond markets through the remainder of the year.
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