European shares down as healthcare stocks drop

After rising almost 0.2% earlier in the day, the pan-European STOXX 600 reversed course and was last down 0.2% to 554.8 points

European shares slid in choppy trading on Friday, weighed by a decline in healthcare stocks, while investors also braced for Fitch’s credit rating on France later in the day.

After rising almost 0.2% earlier in the day, the pan-European STOXX 600 reversed course and was last down 0.2% to 554.8 points, as of 0845 GMT. Healthcare stocks weighed the most, dropping 0.6%.

Swiss pharmaceutical company Novartis shed 2.6% after Goldman Sachs’ downgrade, citing rising competition from generics.

Luxury stocks also dropped 1% with L.V.M.H and Richemont down 0.5% and 1.6%, respectively after brokerage UBS said it was “a least preferred sector”.

However, on a weekly basis, the benchmark index was on track for its first rise in three weeks after U.S. labour data on Thursday firmed market expectations of a Fed rate cut next week.

The U.S. is facing a weaker labour market that is now overpowering the inflationary impact of the tariffs, said Craig Cameron, portfolio manager at Templeton Global Equity Group.

So, there’s obviously various different factors pushing and pulling on that, but our expectation is at least one rate cut in September, he added.

Fitch’s rating review of French credit is due later in the day, with market participants bracing for a potential downgrade. The country appointed its fifth prime minister in under two years as governments struggled to unite over plans for debt-fuelled fiscal spending.

However, French stocks are set for a weekly gain of around 1.3%, outperforming the STOXX index.

The French market remains at a meaningful discount to the global market. There is certainly some discount priced in for political challenges and budget problems. The other point is that French companies have a very international market and so their direct France exposure is quite small, Cameron said.