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European Shares Inch Lower as Financials, Fed Outlook Weigh

  • Financials stocks lead declines
  • Dassault falls on dour annual revenue forecast
  • Euro zone factory activity eases in Jan

Feb 1 (Reuters) - European shares edged down on Thursday as losses in lenders eclipsed the gains in tech sector, while sentiment was dampened by the U.S. Federal Reserve's signals that an early interest rate cut was unlikely.

The pan-European STOXX 600 index fell 0.1% as of 0932 GMT.

Banks dragged the most, down 1.5%, led by an 8.2% drop in BNP Paribas after the French lender missed quarterly earnings expectations, prompting it to push back its 2025 profit target.

Sabadell added to the sector's losses, down 2.6%, as the Spanish bank struck a cautious note on the outlook for net interest income growth in 2024 following a decline in fourth-quarter lending revenue.

Dassault Systemes dropped 7.3% after the French software maker projected revenue growth of 8-10% this year at constant currencies, below analyst expectations.

Losses in Dassault and BNP pulled France's CAC 40 index down 0.7%, among poor performers across the region's bourses.

Adding to the subdued sentiment, market expectations of an early interest rate cut were dampened overnight as the Fed left rates unchanged but was less dovish than anticipated, leading to Wall Street ending sharply lower on Wednesday.

"The Fed has done a lot to encourage this speculation that rates would be coming down, but clearly, still some balancing is to be done there," said Russ Mould, investment director at AJ Bell.

"If inflation is stickier or growth is hotter, rates don't come down as quickly."

On the brighter side, technology stocks provided a boost, rising 0.6%, with shares of Hexagon climbing 5.3% after the Swedish company's fourth-quarter results beat expectations.

Volvo Cars soared 21.1% to the top of the benchmark index after the Swedish automaker said it would stop funding Polestar Automotive Holding .

On Thursday's data front, a survey showed that the downturn in euro zone factory activity eased for a third consecutive month in January.

Markets also digested the euro-zone unemployment data for December and the consumer price index (CPI) inflation data for January.

Among other movers, Adidas shed 7.0% as the German sportswear maker's 2024 outlook missed estimates.

Deutsche Bank was an outlier among banks, up 4.8%, as the German lender announced plans to cut 3,500 jobs, initiate share buyback and pay dividends.

Reporting by Shristi Achar A in Bengaluru; Editing by Rashmi Aich and Dhanya Ann Thoppil

Source: Reuters

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