British banks Barclays, Lloyds and Natwest fall on tax hike jitters

European stock markets moved lower on Friday as attention turned to inflation prints from some of the region’s biggest economies, along with the U.S.

By 9:34 a.m. in London (4:34 a.m. ET), the pan-European Stoxx 600 was 0.5% lower, with almost all sectors in negative territory. Among major regional bourses, the French CAC 40 led losses, shedding 0.6%.

French consumer price inflation cooled to 0.8% in August from 0.9% in July, statistics agency Insee said, just below expectations in a Reuters poll of another 0.9% reading. The low figure was due to declines in energy and manufactured product prices, while inflation in food and services came in at 1.6% and 2.1%, respectively.

Inflation in Spain was steady at 2.7%. Data for Germany is due later Friday.

Defense companies were leading the Stoxx 600 during early trade, with German players Rheinmetall, Hensoldt and Renk all gaining more than 3%.

That came after German Chancellor Friedrich Merz told reporters on Thursday that he was doubtful a meeting between Russian President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskyy would come to fruition.

At the other end of the index were British lenders NatWest, down 4.7%, Lloyds, down 3.7%, and Barclays, down 3.4%.

The Financial Times reported on Friday morning that U.K. banking executives were concerned the country’s finance minister Rachel Reeves may target the sector with measures such as a profit surcharge as she seeks to bolster public finances.

Stateside, investors will be monitoring the personal consumption expenditures price index, a key metric for the Federal Reserve. It comes after Fed Chair Jerome Powell stoked expectations for an interest rate cut in September with a speech last week widely interpreted as dovish-tilting. Interest rate trading currently places around an 85% probability on a cut next month, according to CME’s FedWatch tool.

European markets have been largely negative this week, swayed by French political drama, questions over Fed independence and earnings from chip giant Nvidia.

However, the regional Stoxx 600 index is still heading for a gain of near 1.4% in August — set to be its first back-to-back positive month since the start of the year.