European markets start Friday in the red, Stellantis plunges 18%

Indices

The FTSE MIB is trading at 43.35K, posting robust gains led by banking and energy stocks. This upward momentum suggests continued sector rotation into cyclical and value-driven names. The DAX stands at 23.69K, experiencing a marginal decline and a flat short-term trend as the market consolidates following a period of strong gains, indicating hesitation to commit to new highs without fresh catalysts. The CAC 40, at 8.08K, shows a modest gain and a flat micro-trend, reflecting investor caution as political uncertainties persist. The FTSE 100 is nearly unchanged at 9.7K, with a flat trend signaling a tactical pause as markets digest recent advances and await fiscal signals from the UK government. Meanwhile, the IBEX 35 is trading at record highs, reaching 16.61K, buoyed by strength in the mining and healthcare sectors, though the flat micro-trend suggests consolidation at current levels. The EURO STOXX 50, at 4.35K, is little changed on the day but continues to maintain a strong long-term upward trajectory, underlining the overall resilience in European equities.

Stocks

Stellantis N.V. (STLA) is in sharp focus today, down -18%. This substantial decline follows a recent downgrade from Morgan Stanley to "Equal Weight" with a price target of $10.9, signalling waning analyst confidence amid ongoing challenges. The company continues to contend with negative headlines, including a net loss of €2.26 billion, driven by tariffs and weak North American operations, as well as a substantial recall of plug-in hybrid vehicles due to battery fire risks. The recent volatility, despite earlier gains from strategic initiatives and earnings reports, suggests that the stock is vulnerable to further downside on continued negative news flow and sector headwinds.

Economic News

Recent economic data reveals a slight uptick in Eurozone GDP growth, which has contributed to euro strength and raised expectations for a potentially more hawkish European Central Bank stance. This backdrop is supportive for financials and cyclical sectors, as evidenced by the FTSE MIB’s positive momentum. In the UK, inflation data has injected volatility into currency markets, and the prospect of the Bank of England reconsidering its interest rate path remains a key risk factor for sterling-denominated assets. These developments are directly influencing sectoral leadership and trading flows within European indices.

Economic Events

Key macroeconomic events are set to shape market direction in the coming sessions. Scheduled for today is the release of US Non-Farm Payrolls (NFP), expected to show steady job creation. A stronger-than-expected report would likely bolster the US dollar and could prompt profit-taking in risk assets, while a weaker print may trigger a rally in European equities and a softer dollar. Tomorrow, Eurozone retail sales and Germany’s industrial production data will provide valuable insights into consumer resilience and the health of the manufacturing sector in Europe’s largest economy. Market participants will closely monitor these releases for signals on growth momentum and sector rotation potential.

Market Sentiment

Sentiment across European markets is varied but leans positive overall. The FTSE MIB and IBEX 35 are both buoyed by sector leadership, with strong investor appetite seen in banking, energy, mining, and healthcare. The DAX and FTSE 100 are experiencing a tactical pause, indicative of underlying uncertainty and a wait-and-see approach ahead of key economic data. The CAC 40 reflects investor caution due to persistent political uncertainties in France. For Stellantis, sentiment is mixed to negative, as the stock faces persistent headwinds from operational challenges, analyst downgrades, and high-profile recalls, despite some earlier optimism from strategic initiatives.

Recommendations

Given the current landscape, traders should consider maintaining exposure to the FTSE MIB and IBEX 35, favoring value and cyclicals, while exercising caution on the DAX and FTSE 100 until further confirmation of direction post-economic data. For Stellantis, a defensive stance is warranted; investors may consider further downside protection or await signs of stabilization before initiating new longs. Close monitoring of upcoming macro releases—including US NFP, Eurozone retail sales, and German industrial production—will be crucial, as these could catalyze sharp directional moves across indices and sector leaders. Implementing disciplined stop-losses and dynamically adjusting take-profit levels in line with volatility and news flow is advised for all active positions.

Please note that the analysis is for informational purposes only and does not constitute financial advice. Users should conduct their own research.