European stock markets moved lower on Friday as attention turned to EU and U.S. inflation prints, along with investor concerns about the potential for a U.K. tax raid on banks.
The pan-European Stoxx 600 was 0.6% lower at 10:23 a.m. in London (5:23 a.m. ET), with all sectors in negative territory. Among major regional bourses, the French CAC 40 led losses, shedding 0.58%.
French consumer price inflation cooled to 0.8% in August from 0.9% in July, statistics agency Insee said, just below expectations in a Reuters poll of another 0.9% reading. The low figure was due to declines in energy and manufactured product prices, while inflation in food and services came in at 1.6% and 2.1%, respectively.
Inflation in Spain was steady at 2.7%. Data for Germany is due later Friday.
Defense companies were leading the Stoxx 600 during early trade, with German players Rheinmetall, Hensoldt and Renk all gaining more than 3%.
That came after German Chancellor Friedrich Merz told reporters on Thursday that he was doubtful a meeting between Russian President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskyy would come to fruition.
A general view across Royal Victoria Dock with J.P.Morgan, Citi, HSBC and Barclays bank skyscrapers in Canary Wharf and the IFS Cloud Cable Car on March 11, 2025 in London, United Kingdom.
John Keeble | Getty Images News | Getty Images
At the other end of the index were British lenders NatWest, down 4.4%, Lloyds, down 4.5%, and Barclays, down 3.5%.
The Institute For Public Policy Research published a report Friday suggesting the government impose a levy on commercial banks following recent “windfall profits” related to higher interest rates and bond-buying by the Bank of England.
Targeting banks could prove appealing to U.K. Finance Minister Rachel Reeves as she seeks to bolster public finances in her upcoming fall budget.
Russ Mould, investment director at AJ Bell, said traders were considering whether the “era of bumper profits, dividends and buybacks is now under threat.”
“The timing of the tax debate, fuelled by a report from think-tank IPPR, is unfortunate given it coincides with a new poll from Lloyds suggesting a rise in business confidence, despite cost pressures. This positive sentiment could be threatened if businesses take the view that a new tax on banks might force lenders to tighten their lending criteria,” Mould said in a note. He added that Reeves may be “wary of doing something that could put off investors and shareholders as she seeks to earn favour from the markets and attract investment.”
Natwest share price.
Stateside, investors will be monitoring the personal consumption expenditures price index, a key metric for the Federal Reserve. It comes after Fed Chair Jerome Powell stoked expectations for an interest rate cut in September with a speech last week widely interpreted as dovish-tilting. Interest rate trading currently places around an 85% probability on a cut next month, according to CME’s FedWatch tool.
European markets have been largely negative this week, swayed by French political drama, questions over Fed independence and earnings from chip giant Nvidia.
However, the regional Stoxx 600 index is still heading for a gain of near 1.4% in August — set to be its first back-to-back positive month since the start of the year.
