European stocks slip lower; caution ahead of key U.S. jobless data

European equities declined on Thursday as investors awaited crucial U.S. economic data, including jobless claims, Q2 GDP, and the PCE index, which are expected to provide clearer signals on the Federal Reserve's monetary policy outlook amidst concerns over a weakening labor market. In corporate developments, H&M reported better-than-expected Q3 operating profit but warned of increased U.S. tariff impact on Q4 gross margin, while Birkenstock issued strong fiscal 2025 revenue guidance. Stellantis achieved its first European sales growth in over a year, boosted by EV demand, and Chinese EV maker BYD continued to surpass Tesla in EU sales, while crude oil prices retreated from recent seven-week highs.

Analysis

A cautious tone is pervading European and U.S. markets as investors await key U.S. economic data, including weekly jobless claims, a final Q2 GDP reading, and the PCE price index, which will provide critical signals for future Federal Reserve monetary policy. This follows Fed Chair Jerome Powell's recent comments flagging increased economic risks and uncertainty over interest rates. In Europe, the Swiss National Bank is expected to hold rates at 0% amidst the economic shock of a 39% U.S. tariff. On the corporate front, there is significant divergence. Hennes & Mauritz reported a better-than-expected Q3 operating profit but issued a crucial warning that U.S. tariffs will increase pressure on its Q4 gross margin. In contrast, Birkenstock announced strong preliminary Q4 sales, up 14% on a reported basis, and raised its fiscal 2025 revenue guidance to at least €2.09 billion. Within the automotive sector, Stellantis returned to sales growth in Europe for the first time in over a year, buoyed by EV sales. However, the competitive landscape is shifting, as Chinese automaker BYD outsold Tesla in the EU for the second consecutive month, tripling its sales from the prior month. Meanwhile, crude oil prices have retreated from a seven-week high, with Brent falling to $69.14 and WTI to $64.80, reflecting uncertainty in the supply-demand outlook despite recent inventory draws and geopolitical supply risks.

Key Decisions for Investors

• Given the high degree of uncertainty pending U.S. economic data releases, investors should remain cautious on broad market exposure and monitor jobless claims and PCE inflation figures closely for signals on the Fed's next move.
• The opposing outlooks for H&M and Birkenstock highlight divergence in the retail sector; monitor H&M for margin compression from tariffs, while Birkenstock's strong guidance may warrant a re-evaluation of its growth potential and current valuation.
• In the automotive sector, Stellantis's sales recovery is a positive signal, but the continued ascendance of BYD at Tesla's expense in the EU necessitates a reassessment of market share assumptions and competitive pressures on established EV leaders.
• The pullback in crude oil prices despite bullish supply-side factors suggests market sensitivity to demand-side fears, so positions should be managed with an eye on upcoming economic data that will influence the global growth outlook.