Europe Hits a Holding Pattern After New York’s Soft Open; Retail Shock vs. Insurance Pop Sets the Tone Before Powell

Europe spent Thursday afternoon doing what markets do when a big speech is 24 hours away: not much. As New York kicked off in the red, the STOXX 600 drifted lower and then mostly treaded water, a picture of restraint rather than fear. Traders talked about “not wanting to be clever” ahead of Jackson Hole. Translation: trim risk at the edges, keep some dry powder, and let the Fed chair tell you which way the wind is blowing.
The stock-by-stock action was far livelier than the index suggested. In London, WH Smith became the cautionary tale of the day. A cut to its North American profit outlook—tied to an accounting slip-up—triggered a brutal selloff and dragged parts of the retail complex with it. That pain stood in stark contrast to Aegon, where a bigger buyback and a potential headquarters shift put a tailwind under the shares and brightened the mood across insurers. The split screen captured Europe’s current template: investors are quick to punish any whiff of operational fragility and just as quick to reward clean balance sheets and clear capital-return stories.
Energy and defense once again did their job as portfolio ballast. Oil names found support alongside firmer crude, helped by solid demand signals out of the U.S., while defense contractors benefited from the continent’s evolving security debate. In the Nordics, upbeat exploration chatter kept a few producers on the front foot. Miners, for their part, couldn’t quite get out of first gear as base-metal prices chopped around, reminding everyone that the global goods cycle is still searching for a more convincing beat.
The macro backdrop offered encouragement with caveats. The eurozone’s August flash PMIs showed business activity picking up to the fastest pace in over a year, powered by better new orders. But with exports wobbly and tariffs muddying visibility, enthusiasm remained measured, especially in manufacturing-heavy economies. Government-bond yields nudged higher in core markets, and the euro barely budged—hardly the stuff of decisive factor rotations.
Once the opening bell rang on Wall Street, Europe took its cue. A cautious U.S. tape—retailers under the microscope, tech still digesting a midweek stumble—kept would-be buyers on the sidelines. Flows thinned, and individual names swung harder than the headlines implied, a reminder that when everyone is waiting on the same speech, micro surprises carry extra weight. Real estate and other rate-sensitive groups saw choppier trading as investors recalibrated the odds of a near-term cut against the stickiness of prices and the still-uncertain fallout from tariff policy.
The net effect was a market that looked like it was conserving energy. Defensive stalwarts and cash-generative franchises found steady bids; expensive growth stories gave back a little more ground. Bulls will argue that a dovish nudge from Powell could unstick cyclicals and financials. Bears will say we’re staring at more range-bound chop until inflation cools further. Either way, Thursday’s session made one thing plain: Europe is content to wait for directions—and it won’t have to wait long.