European shares log weekly losses on inflation worries; Volkswagen jumps

Published Sat, Sep 5, 2026 · 07:56 AM

EUROPEAN shares ended the week lower on Friday (Sep 4), though a rally in Volkswagen helped steady the market after the automaker agreed on a major turnaround plan.

The benchmark Stoxx 600 ticked up 0.1 per cent to finish at 649.88 points on Friday, capping a volatile week with an overall decline of 0.8 per cent.

The weekly slide was fuelled by escalating conflict in the Middle East, which sent crude prices higher and added to investor concerns over sticky inflation, rising government debt and prolonged central bank tightening.

A resilient US non-farm payrolls report also shaped Friday’s sentiment, signalling ongoing stability in the US labor market, reinforcing expectations that the Federal Reserve could raise interest rates later this month.

Investors are now turning their attention to next week’s US consumer inflation print for a clearer signal on the Fed’s trajectory.

“Fed chairman Warsh’s decision to look past labor-market softness at Jackson Hole and focus on inflation has been vindicated and this report gives the Fed more ammunition to tighten in September,” said Eric Merlis, managing director and co-head of global markets at Citizens.

The prospect of higher US interest rates has added another layer of pressure to global equities just as European economies grapple with sluggish growth and rising energy costs.

European bourses found support late in the session as intraday oil prices eased and corporate headlines lifted investor mood.

Leading the market higher, Volkswagen jumped 5.9 per cent to hit a two-month high, topping Germany’s DAX index after the supervisory board of Europe’s largest automaker struck a turnaround agreement that averted an escalation with unions and shareholder Lower Saxony.

The automaker faces pressure from US import tariffs, a stagnant European market as well as aggressive Chinese rivals that have all hurt its margin and hammered the stock. Despite Friday’s gain, its shares are down 22 per cent so far this year.

“Investors have a habit of applauding major cost cutting exercises, yet there is always the risk that the respective company is cutting too close to the bone and leaves itself short of resources should demand pick up,” said Dan Coatsworth, head of markets at AJ Bell.

Lifted by Volkswagen’s performance, the broader European autos index gained 1.1 per cent.

Next week, the market focus will shift to the European Central Bank’s (ECB) policy meeting, where a 25-basis-point rate hike is widely anticipated.

JPMorgan and BNP Paribas said they expect the ECB to deliver another 25-basis-point rate hike in December, as elevated energy prices strengthen the case for further tightening. REUTERS