European shares fall as investors await bank earnings

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European shares fell on Friday following slower gains in Asia, as investors waited for earnings from big US banks to show the extent to which lenders have benefited from rising interest rates.

Europe’s region-wide Stoxx 600 declined 0.1 percent in early trade, having risen for five straight sessions, its best streak since mid-April. France’s CAC 40 rose 0.2 percent, Germany’s DAX shed 0.1 percent and London’s FTSE 100 swung between gains and losses.

Asian markets were mixed after US economic data showed signs of easing inflation, with producer and consumer prices falling more than expected in June. South Korea’s Kospi rose 1.7 percent, Hong Kong’s Hang Seng index gained 0.2 percent and China’s CSI 300 was flat. Japan’s Topix fell 0.2 percent.

Investors will turn their attention on Friday to US lenders Citigroup, JPMorgan and Wells Fargo, whose second-quarter results came at a time of intense scrutiny of the lenders’ balance sheets following the collapse of three regional banks in the spring.

Banks are expected to report the biggest jump in loan losses since the start of the coronavirus pandemic, as rising interest rates increase pressure on borrowers. A tighter monetary policy is likely to simultaneously increase banks’ returns from investment and lending.

The contract tracking Wall Street’s benchmark S&P 500 and the one tracking the tech-heavy Nasdaq 100 both fell less than 0.1 percent ahead of the New York open. Both indexes have risen steadily since the beginning of the year despite rising rates, raising concerns of a possible selloff if the economy sinks into recession.

Mike Zygmont, head of trading and research at Harvest Volatility Management, said, “We’re ready for a pullback, but there’s upside fever out there, so we won’t see it for a while.” “Some really great news or data would be needed for this bullish trend to continue. I personally don’t think earnings season can do that.

The US dollar declined 2.4 percent this week on lower-than-expected inflation data, its worst performance since November, according to Bloomberg data. However, the dollar index, which tracks the greenback against six other major currencies, strengthened 0.1 percent on Friday.

“While dollar long positions are fading fast, the (producer price) numbers are confirming the story of deflation in the US,” said Francesco Pesole, currency analyst at ING.