European Stocks Rebound from Three-Week Lows, but Weekly Momentum Fizzles

European stocks recovered from three-week lows on Friday, driven by gains in financials and industrials, but ended the week flat. Spanish stocks outperformed, rising 1.3% to close at a one-week high. German insurer Munich Re and French insurer SCOR led the sector higher, while steel producers such as ArcelorMittal and Thyssenkrupp rose on reports of European Commission tariffs on Chinese steel products. Healthcare stocks reversed earlier losses to end flat, despite US President Donald Trump's announcement of new tariffs on branded drugs.

European stocks rebounded from a three-week low on Friday, driven by gains in financials and industrials, but ended the week flat. Spanish stocks outperformed, rising 1.3% to close at a one-week high. German insurer Munich Re and French insurer SCOR led the sector higher, while steel producers such as ArcelorMittal and Thyssenkrupp rose on reports of European Commission tariffs on Chinese steel products. Healthcare stocks reversed earlier losses to end flat, despite US President Donald Trump's announcement of new tariffs on branded drugs.

The Stoxx Europe 600 Index rose, with financials and industrials sectors leading the way. The healthcare sector erased earlier losses, while Spanish stocks outperformed with a 1.3% gain. German insurer Munich Re and French insurer SCOR led the sector higher, while steel producers such as ArcelorMittal and Thyssenkrupp rose on reports of European Commission tariffs on Chinese steel products.

The recovery in European stocks was driven by better-than-expected US personal spending data, which boosted investor sentiment. The healthcare sector, however, faced nervousness due to Trump's announcement of new tariffs on branded drugs. The sector erased earlier losses, ending flat.

Financial stocks were advancing in Friday afternoon trading, with the NYSE Financial Index and the Financial Select Sector SPDR Fund (XLF) each rising about 1%. The Philadelphia Housing Index was climbing 1.3%, and the Real Estate Select Sector SPDR Fund (XLRE) added 1%. Bitcoin (BTC-USD) was increasing 0.8% to $110,035, and the yield for 10-year US Treasuries was rising 2 basis points to 4.19%.

US personal income gained 0.4% in August while personal consumption expenditures rose 0.6%, both above forecasts. The PCE price index increased 0.3% month over month, as expected, and rose 2.7% from a year earlier. The core measure was up 0.2% month over month, as expected, and was steady at 2.9% annually.

In corporate news, Apollo Global Management (APO) is in talks to buy a 50% stake in Orsted's 8.5 billion pound ($11.34 billion) Hornsea 3 offshore wind farm located off the UK's east coast. Apollo shares rose 2%. Enigmatig (EGG) shares jumped 5.2% after it said Friday it signed a memorandum of understanding with TVA Capital to help Asia-Pacific corporates and small and medium-sized enterprises deliver sustainable and long-term growth. Tiptree (TIPT) and Warburg Pincus have agreed to sell 100% of US specialty insurer Fortegra to South Korea's DB Insurance for about $1.65 billion in cash. Tiptree shares fell 5.8%.

European equities have been drifting in a narrow range as investors weighed the outlook for US interest-rate cuts. With consumers remaining resilient, the Federal Reserve’s preferred inflation gauge grew at a slower pace than the month before. "Given the lack of detail, the potential that only a limited number of drugs may actually be affected and the risk that wide-ranging price rises could backfire politically, we would refrain from cutting pharma exposure in response to the announcement," said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. In other individual stocks, STMicroelectronics NV was down after a Wall Street Journal report that the Trump administration was weighing plans to reduce US reliance on chips made overseas.