Borrowing costs will steal the show for European equities again next week, with two key rate verdicts looming in Europe, as investors fret this week's US rate cut may be the last from the Fed for now. A slew of results from European companies could also help set the market's tone.
Euro zone interest rates look likely to stay at 4.0 percent when the European Central Bank meets on Thursday, a Reuters poll showed. And the Bank of England is also expected to announce it will hold rates steady, thanks to resilient economic growth. At 1459 GMT on Friday, the pan-European FTSEurofirst index was down 14 points or 0.9 percent at 1556.32, having lost 1.3 percent since the end of last week.
On Wednesday the US Federal Reserve cut interest rates by 25 basis points in a bid to buffer the United States from a housing slump. But European stock markets dropped in sessions following the US rate verdict, as investors digested suggestions in the Fed's statement that further rate reductions were far from a sure bet.
"Investors are clearly nervous," said Henk Potts, equity strategist at Barclays Stockbrokers. "There are a number of things that investors have been spooked by this week," he added, citing the Federal Reserve's statement, soaring oil prices and lacklustre third-quarter company results.
Only a handful of analysts expect a Bank of England cut compared with one in four a few weeks ago, a Reuters poll showed. "The Bank of England's in wait-and-see mode," Barclays' Potts said. "We don't anticipate rates to be cut."
On the corporate front, a raft of European companies will report next week, including France's Total, Lafarge, Societe Generale and Electricite de France, and Germany's Altana, Bayer, Heidelberg Cement and Hypo Real Estate.
Denmark's Carlsberg is also due to release third-quarter results next week, while Germany's BMW will release interim earnings results on Tuesday. Elsewhere, investors in the UK will eye first-half results from Yell Group, BT Group, Man Group and Carphone Warehouse.
Aside from rate verdicts, other data on next week's economic agenda will include the US Institute for Supply Management's non-manufacturing index for October on Monday, Euro zone PPI data for September on Tuesday and the University of Michigan's reading of consumer sentiment for November, due on Friday.
On Friday this week investors were cheered a little after the US Labour Department said employers added a surprisingly strong 166,000 new non-farm jobs in October, twice as many as Wall Street economists had forecast and the strongest hiring since May.
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