European markets close lower after ECB-fueled rally; Rolls-Royce ends nearly up 8%

Key Points
  • The pan-European Euro Stoxx 600 closed down by 0.8 percent, with all major bourses and most sectors in negative territory.
  • This followed a rally in the Thursday session fueled by news from the European Central Bank on the future of its bond-buying program.
  • Rolls Royce led the gains, up by about 8 percent. The British aircraft-engine maker pledged Friday to boost cash flow.

European shares closed lower Friday afternoon as investors paused for breath after a rally in the previous session fueled by the European Central Bank (ECB).

The pan-European Euro Stoxx 600 closed down by 0.8 percent, with all major bourses and most sectors in negative territory. The FTSE 100 in London closed lower by 1.7 percent.

Basic Resources stocks fell the furthest, finishing the Friday session over 3 percent lower. Meanwhile, the Banking, and Oil and Gas sectors were both over 1.8 percent lower. Food and Beverages was the top performer, ending 0.4 percent above the flat line.

Looking across Europe, Rolls Royce led the gains, closing up by 7.6 percent though it had been trading higher earlier in the day. The British aircraft-engine maker raised its cash flow forecast.

Shares of H&M were under pressure, closing down by over 4.3 percent after reporting second-quarter sales slightly below expectations. Meanwhile, Tesco closed near the top of the European benchmark, despite paring back some of the day's gains to close 2 percent higher. The British supermarket reported first-quarter sales that met forecasts and confirmed its outlook.

US stocks tumble

Stateside, stocks dropped on Friday after the Trump administration said it will impose a 25 percent charge on up to $50 billion in Chinese goods, realizing fears of a trade war between the U.S. and China.

The Dow Jones industrial average fell 250 points, with Caterpillar and Boeing as the worst-performing stocks in the index. Both firms are big exporters and subsequently pressured by rising trade tensions.

The S&P 500 dropped 0.6 percent as energy and materials lagged. The Nasdaq composite also fell 0.6 percent.

Back in Europe, investors were digesting ECB plans to end its massive stimulus program this year, though the central bank delayed any potential rate hikes until at least the third quarter of 2019. Given that traders were expecting a first rate hike would come as early as June 2019, the euro dropped on the news and stocks soared to close sharply higher Thursday.