Published by Global Banking & Finance Review®
Posted on August 29, 2025
3 min readLast updated: January 22, 2026
Add as preferred source on GoogleEuropean shares faced their first weekly loss in four weeks due to declines in banking stocks and economic data from the U.S. and euro zone.
By Medha Singh and Sukriti Gupta
(Reuters) -European shares closed lower on Friday, hitting their lowest in over two weeks, weighed down by British banks, while investors assessed economic data in the U.S. and the euro zone.
Natwest dropped 4.8%, while Barclays and Lloyds shed 2.2% and 3.4%, respectively, as a think tank recommended Britain's government should tax banks on the billions of pounds they receive in interest from the Bank of England on the reserves they hold at the central bank.
This weighed on the broader banks index, down 0.9%. The index logged its sixth session of declines, its longest losing streak since October 2023.
The pan-European STOXX 600 closed 0.6% lower, registering its first weekly loss in four, with questions over the independence of the U.S. Federal Reserve and political uncertainty in France weighing on the index. However, it rose for the second consecutive month.
Fed independence has come into focus as President Donald Trump has stepped up his campaign to exert more influence over monetary policy, including his attempt to fire Governor Lisa Cook. Cook filed a lawsuit on Thursday saying Trump has no power to remove her from office.
Meanwhile, data showed the U.S. Personal Consumption Expenditures Price Index rose 2.6% in July on an annual basis, as estimated, suggesting a mild impact of tariffs on inflation.
However, it is not expected to prevent the Federal Reserve from cutting interest rates next month against the backdrop of softening labour market conditions.
"It remains the base case that they (Fed) will cut interest rates in September, but the higher inflation reading does put a seed of doubt into that," said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
FRENCH WOES
Major regional bourses also closed lower, with Germany's DAX down 0.6%.
German inflation accelerated more than expected in August while unemployment topped 3 million for the first time in a decade. French consumer prices rose slightly less than anticipated in August.
European technology stocks lost the most, tracking U.S. peers. ASML fell 2.7% and SAP fell 1.9%. Conversely, defence stocks were higher with the broader index up 0.4%.
France's CAC 40 has shed 3.3% this week, lagging regional peers, on concerns over a potential collapse of Prime Minister Francois Bayrou's government next month.
In September, the ECB is expected to keep rates on hold, mirroring its July meeting, after delivering eight rate cuts since mid-2024.
Renewable energy companies Orsted and Vestas Wind closed 3.3% and 3.1% lower respectively. The U.S. administration said it was cancelling $679 million in federal funding for 12 offshore wind projects.
Remy Cointreau fell 4.1%, even as the French spirits maker raised its full-year 2025/26 profit outlook.
(Reporting by Medha Singh, Sukriti Gupta and Purvi Agarwal in Bengaluru; Editing by Sherry Jacob-Phillips, Eileen Soreng and Alison Williams)
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy to achieve economic stability.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
Banking stocks are shares of companies in the banking sector. They can be affected by various factors, including interest rates, economic conditions, and regulatory changes.
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
Explore more articles in the Finance category
