European markets retreated on Friday, with both the STOXX 50 and the STOXX 600 dropping approximately 1%. This decline erased earlier momentum, leaving the benchmarks largely flat for the week.
The downturn was most pronounced in consumer cyclicals, consumer defensives, and the financial sector. Notable laggards included Siemens (-2.9%), L’Oréal (-2.4%), and Banco Santander (-2.3%), while luxury giants like LVMH and Hermès also saw significant pullbacks.
Conversely, the geopolitical climate provided a tailwind for defense and energy stocks. Companies such as Rheinmetall (+1.2%), Repsol (+1.8%), and BP (+1.7%) all recorded gains as energy security and military spending remain top of mind for traders.
A standout performer amidst the broader sell-off was Zalando, which surged 3.6% to lead the STOXX 600. The online retailer’s jump extended a rally from the previous session, fueled by a report of upbeat quarterly results that bucked the general market gloom.
How did FX markets react?
The US dollar surged to a more than three-month high on Friday, marking its highest level since late November and securing a second consecutive weekly gain. The greenback’s strength is being driven by its dual status as a premier safe-haven asset during the ongoing conflict in Iran and the United States’ position as a net energy exporter, which shields it from some of the global oil price volatility.
The dollar index rose 0.16% to 99.83, positioning it for a 1% overall increase for the week.
This dollar dominance pressured major global currencies significantly:
- Europe: The euro slipped to $1.1501, its lowest point since November 21, while sterling dipped to $1.333.
- Asia-Pacific: The Japanese yen weakened to 159.69 per dollar—its softest level since July 2024, while the Australian dollar and New Zealand kiwi both trended lower, with the kiwi dropping 0.44%.
Bucking the general downward trend in risk assets, cryptocurrencies showed resilience on Friday. Bitcoin gained 1.90% to reach $71,527.50, and Ether followed suit with a 2.23% increase to $2,109.03, suggesting some investors may be looking toward digital assets as alternative hedges or speculative plays amid the traditional market turmoil.
Currency Power Balance
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