- UK homebuilders fall after rally
- Tech set to underperform peers this week, banks shine
- Ipsen shares fall after failed experimental FOP drug trial
Dec 19 (Reuters) - European shares were largely muted on Friday, as losses in tech and consumer stocks were offset by gains in banks, but were set to end a week filled with macroeconomic catalysts with robust gains.
The pan-European STOXX 600 was up 0.1% at 585.71 as of 0932 GMT, a day after it logged its best one-day performance in more than three weeks.
The STOXX 600 is on track for its best annual performance since 2021, buoyed by falling interest rates and global investors diversifying away from premium-valued U.S. technology stocks.
On the day, major regional markets traded muted, with Germany's DAX up 0.2% and London's FTSE 100 flat.
Most key sectors inched lower, with personal and household goods trading at the bottom. British homebuilders declined with Vistry, Bellway and Persimmon down between 1.5% and 2.5% after rallying for at least three sessions on hopes of a rate cut in England.
Technology shares fell 0.3%, set to underperform peers this week as renewed concerns about AI valuations brought them under selling pressure.
On the flip side, industrials gained 0.3%, the biggest boost, followed by banks that have largely supported the index this week.
Markets seemed to pull back after Thursday's gains, when sentiment improved after data showed an unexpected slowdown in U.S. consumer price inflation, strengthening expectations for Federal Reserve interest rate cuts in 2026.
However, analysts urged caution while interpreting the data, noting that it was likely distorted downward by the recent U.S. government shutdown.
"The rally is still on the table, but it might not be as strong as many would have expected in the season finale of this year," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
"The macro backdrop remains positive for equities because even though the ECB said they are now coming towards the end of the rate cutting cycle, the dovish Fed expectations alone are going to be supportive."
The European Central Bank maintained a hawkish stance on Thursday, keeping rates steady while signalling that its current easing cycle may be approaching its end.
Among stocks, Ipsen fell 1.1% after the biopharmaceutical company said a pivotal trial for treatment of fibrodysplasia ossificans progressiva (FOP) failed to meet its primary endpoint.
Puma fell 1.3% after U.S. peer Nike reported a drop in gross margins for the second consecutive quarter.
Meanwhile, progress on a Russia-Ukraine ceasefire will be watched as European Union leaders decided to borrow cash to loan 90 billion euros ($105 billion) to Ukraine to fund its defence for the next two years, ahead of a meeting between U.S. and Russian officials over the weekend.
($1 = 0.8537 euros)
Reporting by Ragini Mathur and Purvi Agarwal; Editing by Mrigank Dhaniwala
Source: Reuters