Following a negative close on Wall Street and losses across Asian stock markets, European indices started the day lower, with Frankfurt and Paris dipping 0.2 percent at the opening and Milan slipping 0.1 percent. London opened nearly unchanged, holding steady rather than extending declines.
Investors were watching closely for statements from key central bankers, with Jerome Powell of the U.S. Federal Reserve and Christine Lagarde of the European Central Bank set to address audiences at the Jackson Hole Summit. Powell was slated to speak after European markets had closed, keeping the focus on how monetary policy might adapt to shifting recession risks and inflation dynamics.
Central banks grapple with how high they can keep interest rates amid recession risk
In macroeconomic updates, Germany’s statistical office confirmed that Europe’s powerhouse economy emerged from a technical recession in the second quarter, with GDP flatlining rather than contracting. Analysts said the momentum might stretch into the third quarter, a view echoed by the Bundesbank, which warned that the path to sustained growth remains fragile and dependent on demand and external conditions. The data painted a picture of a European economy that is navigating a delicate balance between cooling inflation and supporting activity, with policy rates staying elevated for longer as a precaution against renewed inflation pressures.
Spain’s July industrial data showed inflation in industrial prices continuing its downward trajectory, dropping to 8.4 percent as electricity costs fell. The slide marks the fifth straight month of annual declines, a trend that has been credited to easing energy prices and improving efficiency in production, though broader supply chain resilience remains a concern for some sectors.
In the early hours of the most recent session, the Ibex 35 led declines among major markets as Grifols, IAG, Colonial, and Fluidra traded lower. Conversely, gains were recorded in several stocks, with Repsol, Santander, Telefónica, Redeia, and Banco Sabadell among the notable movers higher, reflecting a mix of sector performance and company-specific news shaping intraday sentiment.
At the opening bell, Brent crude—the benchmark for European oil markets—edged higher, rising about 0.4 percent to $83.75 per barrel. The U.S. benchmark, WTI, gained roughly 0.5 percent to around $79.50. Energy prices continued to influence broader risk sentiment as markets weighed geopolitical and supply-side factors against the backdrop of expectations for demand growth later in the year.
The euro traded modestly softer against the dollar, slipping to around 1.0783, signaling continued currency market volatility as investors assessed cross-border inflation risks and the evolving stance of major central banks. In debt markets, Spain’s 10-year yield climbed to about 3.56 percent, reflecting a cautious appetite for longer-dated government paper amid shifting expectations for policy path and fiscal resilience.
Across Q2 performance and policy discourse, observers highlighted the divergence between resilient consumer demand in some economies and pockets of weakness in others. Market participants are watching whether robust services activity and improved labor markets can sustain momentum, even as manufacturers grapple with input costs and modest export demand. The Jackson Hole gathering is expected to yield fresh signals on the tempo of rate normalization and the alignment of central bank strategies with growth forecasts, a combination that could set the tone for sessions in North American and European markets in the coming weeks. Attribution: market reports and central bank commentary from Reuters.