European shares fell on Friday, as hokey comments from US policymakers dampened expectations of an imminent interest rate cut, with the benchmark STOXX 600 index posting its strongest weekly performance since late September.

The pan-European STOXX 600 closed down 1% at 574.81 points, with banks off 2.4%.

Macro developments in the US are in the spotlight this week and investors had hoped that the resumption of data releases would point to a weaker economy and give the Federal Reserve a reason to cut borrowing costs in December.

However, a growing number of Fed policymakers have since signaled caution about easing expectations further.

Additionally, technology stocks came under renewed selling pressure.

“If indeed (US markets) are in bubble territory and the fact that the Fed won’t ease, that will be bad for equities and certainly have an impact on European markets. The tech sector in Europe is very small, but it could have an impact,” said Anthy Tsovli, multi-asset global management strategist at UBS.

“A lot of times, it’s about sentiment. So when sentiment goes down, unfortunately, it affects a lot of markets.”

Anticipation of a rate cut with the end of the longest US government shutdown sent the STOXX index to record highs several times this week.

European tech stocks fell 1.4%. It hit a seven-week low earlier in the session.

Bucking the day’s trend, luxury group Richemont rose 5.9% and led the broader luxury sector after reporting quarterly sales ahead of forecasts.

Siemens Energy jumped 9.4% after the German company announced plans to pay its first dividend in four years and raised its mid-term outlook.

Meanwhile, the UK’s FTSE 100 lost 1.1%, pressured by rising gilt yields after a report that Finance Minister Rachel Reeves scrapped plans to raise income tax rates in the next budget, raising questions over plans to balance public finances.

“There are things they (the government) can do, you know, tinker around the edges in terms of capital gains and property taxes and things like that. But ultimately none of them are big enough to move the needle,” said Michael Field, chief equity strategist at Morningstar.

Meanwhile, data showed the euro zone economy continued to expand at a modest but respectable pace in the third quarter while the trade surplus widened in September thanks to healthy exports to the US.

In other moves, Nibe Industries plunged 12.9% after reporting third-quarter results, while Danish vaccine maker Bavarian Nordic lost 5.7% after it narrowed its 2025 revenue outlook and its chairman Luc Debrun said he would step down.

IT provider Bechtle rose 14.9% after delivering “strong” Q3 results.