(Reuters) -European shares fell on Wednesday tracking overnight declines on Wall Street, with financials and bank stocks leading early declines, though gains in some defence-related stocks helped
European Stocks Decline as Commodity and Defence Gains Offset Luxury Losses
Market Overview and Sector Performance
By Shashwat Chauhan, Amir Orusov and Pranav Kashyap
Commodity and Defence Sector Gains
(Reuters) -European stocks slipped on Wednesday as commodity and defence rallies faced resistance from heavyweight healthcare and luxury names, with investors parsing fresh signals from Federal Reserve Chair Jerome Powell.
Luxury and Healthcare Sector Losses
The pan-European STOXX 600 closed 0.2% lower, while regional bourses were mixed. The French benchmark led losses, down 0.6%.
Investor Sentiment and Future Outlook
The basic resource sector jumped 1.8% as copper prices rose to a 15-month high, while crude prices hit a three-week high, pushing the energy sector up 1.5%.
Anglo American surged 4.7% after Endiama bid for a minority stake in the miner's diamond unit De Beers.
Defence stocks, including Rheinmetall, Hensoldt and SAAB, rose between 3% and 8% after U.S. President Donald Trump said he believed Ukraine could retake all its land occupied by Russia and that Kyiv should act now.
Losses in heavyweight luxury stocks such as LVMH, Hermes, Richemont and EssilorLuxottica kept STOXX 600 gains in check.
The subindex for luxury stocks dropped 1.5%.
Meanwhile, healthcare stocks slipped 0.6%, with heavyweights AstraZeneca and Roche down 2% and 0.4% respectively.
Automobile stocks pared losses and closed 0.6% lower after Bloomberg News reported that Washington formalized lower auto tariffs, effective August 1.
Wall Street stocks also stumbled as investors combed through Powell's latest remarks, which offered little clarity on the Fed's path ahead for interest rates.
Traders are betting on at least one more rate cut this year, with odds of an October move topping 94%, according to the CME FedWatch Tool.
The Fed's first rate cut of 2025 last week lit a fire under global assets, lifting European and U.S. equities. But after a strong start to the year — fueled by gains in defense stocks — European shares have lost momentum, trailing their U.S. peers amid a relentless artificial-intelligence-driven rally that has pushed American benchmarks to record highs.
"The risk is the Fed turns more dovish by the time of the December meeting because restrictive monetary policy can worsen the employment backdrop and upside risks to inflation are not materializing," said Elias Haddad, senior markets strategist at Brown Brothers Harriman.
The STOXX 600 sits about 2% shy of its March peak, up about 9.2% year-to-date. Meanwhile, the S&P 500 has risen close to 13%.
Lanxess fell 6.6% after Deutsche Bank downgraded the German chemical company's stock to "hold" from "buy".
A survey of German business morale showed an unexpected decline in September as the economic outlook remained weak.
(Reporting by Shashwat Chauhan and Pranav Kashyap in Bengaluru and Amir Orusov in Gdansk; Editing by Mrigank Dhaniwala and Richard Chang)
