European stock markets were mostly quiet on Friday. Although technology and retail companies saw some losses, strong performance from major banks helped balance things out.
Overall, the markets were set to finish the week with solid gains after a busy few days of economic news. The STOXX 600 index dropped just slightly, with similar small declines seen in Germany and London.
Some well-known brands struggled, specifically German sportswear makers Adidas and Puma. Their stock prices fell after their American rival, Nike, announced it was making less profit than expected.
On the other hand, banks were among the best performers, helping to prop up the market. Investors were generally feeling hopeful because inflation in the United States slowed down unexpectedly on Thursday, leading many to believe that interest rates might be cut in 2026.
However, financial experts warned that these inflation numbers might be misleading because the recent US government shutdown made it hard to collect accurate data.
In political news, European Union leaders agreed to borrow money to provide a €90 billion loan to Ukraine for its defense against Russia. They chose this path instead of using frozen Russian assets. This decision had a ripple effect on the financial markets, causing the interest rates (yields) on German government bonds to go up.
On the FX front, the Japanese Yen lost value on Friday during a chaotic day of trading. Although the Bank of Japan raised interest rates from 0.5% to 0.75% as predicted, traders immediately sold off the Yen once the news was confirmed.
The currency weakened even more after the bank’s Governor, Kazuo Ueda, avoided giving a clear timeline for when rates might rise again. Consequently, the Yen dropped 0.6% against the US dollar, while the Euro surged to a record high against the Japanese currency.
Meanwhile, the British Pound had a bumpy ride but ended up roughly where it started against the dollar at 1.3374. This happened after the Bank of England cut interest rates to 3.75%; however, the vote among policymakers was much closer than expected, which suggests they might not be able to cut rates again soon.
The Euro remained flat against the dollar because the head of the European Central Bank, Christine Lagarde, refused to commit to a specific future plan, stating only that all options remain open.
Currency Power Balance
