European equities tumbled on Friday, echoing overnight declines on Wall Street as concerns over the financial health of U.S. regional banks rippled through global markets. Investors are also bracing for the release of key eurozone inflation figures.
At 07:10 GMT, the DAX in Germany was down 2%, the CAC 40 in France dropped 1.1%, and the FTSE 100 in the U.K. fell 1.5%.
U.S. markets closed lower on Thursday, dragged down by a sharp selloff in financial stocks late in the session. The Dow Jones Industrial Average lost more than 300 points, or 0.7%, while the S&P 500 and NASDAQ Composite ended the day down 0.6% and 0.5%, respectively.
Banking Sector Under Pressure
The European banking sector came under renewed scrutiny after U.S. lenders Zions Bancorporation (NASDAQ:ZION), Jefferies Financial Group (NYSE:JEF), and Western Alliance Bancorporation (NYSE:WAL) revealed a string of problematic loans on Thursday, heightening concerns over credit risk.
The U.S. regional banking system has experienced several high-profile failures since 2023, and the latest developments have once again raised questions about the resilience of the sector. More regional banks, including Comerica (NYSE:CMA) and Fifth Third Bancorp (NASDAQ:FITB), are scheduled to report earnings later today.
In Europe, Norion Bank posted a 10% year-on-year rise in third-quarter net profit and announced plans for a new share buyback program.
Eurozone Inflation in the Spotlight
Investors are also awaiting confirmation of September’s consumer price inflation data for the eurozone, which is expected to come in at 2.2% annually, in line with the flash estimate and just above the European Central Bank’s 2% medium-term target.
The ECB has lowered rates by two percentage points between 2023 and June 2025 but has since held steady, arguing that inflation is now close to target. Markets widely expect the central bank to keep rates unchanged at its upcoming policy meeting at the end of the month.
Political Tensions in France
French politics remain tense after Prime Minister Sébastien Lecornu survived two no-confidence votes on Thursday, easing the risk of snap elections but weakening the government of President Emmanuel Macron. To maintain stability, Macron was forced to delay his flagship economic reform until after the 2027 presidential election.
Auditors warned that pushing back the reform could leave a €13 billion annual shortfall in public finances by 2035 if no changes are made after 2027.
Corporate News
In company updates, Pearson PLC (LSE:PSON) posted a 4% rise in third-quarter sales, bringing year-to-date growth to 2%. The education company expects stronger performance in the fourth quarter, driven by favorable unit dynamics and its expanding digital offerings.
Volvo Group (BIT:1VOLC) reported third-quarter operating earnings in line with expectations, though weaker demand in the Americas weighed on results.
Hermès (EU:RMS) confirmed the departure of Véronique Nichanian, its menswear artistic director, after 37 years with the brand. Meanwhile, German newspaper Bild reported that the supervisory board of Porsche AG (TG:PAH3) has agreed on a successor to CEO Oliver Blume.
Oil Prices Ease as Peace Talks Loom
Crude prices slipped on Friday after U.S. President Donald Trump and Russian President Vladimir Putin agreed to meet to discuss a potential resolution to the war in Ukraine.
Brent Crude futures were down 0.8% at $60.60 a barrel, while West Texas Intermediate futures also dropped 0.8% to $57.01. Both benchmarks were down nearly 3% for the week, touching their lowest levels since early May, as the planned peace summit in Budapest added to downward pressure.
Concerns over weakening demand, a potential oversupply, and rising U.S. crude inventories have also weighed on oil markets.
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