MW: European stocks decline as investors step cautiously ahead of Yellen
European stocks drove lower Friday, with caution setting in as investors waited to hear what Federal Reserve Chairwoman Janet Yellen may say about a possible interest rate increase.
The Stoxx Europe 600 SXXP, -0.25% fell 0.2% to 375.02, led by consumer services and utility shares. But financial and oil and gas shares advanced.
But French stocks bucked the trend, swinging higher after the release of polling in the French presidential race.
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The Stoxx 600 was still on course for a 1.3% rise for the week, during which it notched its strongest close since early December. Equities globally leapt this week — with the Dow Jones Industrial Average DJIA, -0.53% hitting 21,000 for the first time — after U.S. President Donald Trump reiterated his promise of more fiscal spending and tax cuts.
Read: There’s another land of opportunity in the reflation trade — Europe
As well, a number of Fed officials signaled that the world’s largest economy appears ready for another interest rate hike. The probability of a rate rise in March has now reached 77.5%, up from around 30% late last week, according to CME Group data.
But stocks declined Friday as investors waited to hear from Yellen, who will speak at 5 p.m. London time, or 1 p.m. Eastern Time. Other Fed officials are scheduled to make comments throughout the day.
“Yellen will likely confirm the same message we have heard this week, that a hike soon is appropriate and three hikes are still expected in 2017,” said James Woods, global investment analyst at Rivkin Securities, in a note.
“For investors higher rates coupled with a strong U.S. economy should continue to see the outperformance of cyclical equity sectors, namely financials, consumer discretionary and basic materials,” he said.
The European Central Bank will release its next policy update on Thursday. Investors will watch for what policy makers may say about the climb in inflation in the eurozone which this week hit 2%. That’s above the bank’s target of below, but close to, 2%.
Movers: But a source of worry in European trade Friday came from WPP PLC WPP, -8.48% . Its shares stumbled 7.8% after the world’s largest advertising company forecast slower growth for 2017 and said revenue growth fell in the second half of last year as clients in the U.S. and U.K. spent less.
“Interesting that WPP noted ‘tepid economic growth’ – exactly the reverse of what we’re seeing in terms of equity market bullishness and the Trump trade – pro-growth, pro-inflation,” wrote Neil Wilson, senior market analyst at ETX Capital, in a note.
At the bottom of the Stoxx 600 was Berendsen PLC BRSN, -13.93% as shares sank 15%. The British laundry-services company warned that the costs of solving problems with plant and machinery in the U.K. would continue to hurt earnings this year.
France: The CAC 40 PX1, +0.61% turned higher, climbing 0.7% to 4,996.88, after new polling was released Friday for the country’s presidential race. Centrist politician Emmanuel Macron for the first time took the lead over far-right candidate Marine Le Pen in an Odoxa poll. There are worries among investors that Le Pen, who’s in favor of ditching the European Union and the euro, could win the first round of presidential voting on April 23.
The euro EURUSD, +0.5805% pushed up to $1.0554 compared with $1.0508 late Thursday in New York.
Indexes: Germany’s DAX 30 DAX, -0.19% fell 0.1% to 12,042.69 and the U.K.’s FTSE 100 UKX, -0.24% fell 0.3% to 7,360.53.
