UKX FTSE 100 Index

By Ryan Vlastelica

Euro-area annualized inflation was 2.1% in July, up from 2.0%

European stocks mostly ended the day lower on Friday, with Italian shares leading the move lower as investors fretted over the state of the country's banks.

While indexes finished off their lows of the session, it wasn't enough to erase the recent downtrend in equity prices. Many regions posted their third straight weekly drop, while shares in the U.K. had their worst weekly performance in months.

Where are the major benchmarks trading?

The Stoxx Europe 600 fell 0.1% to 381.07. For the week, the pan-European index lost 1.2% in its third straight weekly decline. The recent losses, which include the gauge's biggest one-day fall (http://www.marketwatch.com/story/european-stocks-inch-higher-as-turkish-lira-extends-rebound-2018-08-15) since June 25 on Wednesday, have come on concerns over Turkey's currency crisis, as well as weak commodity prices.

The biggest mover in major European regions came from Italy's FTSE MIB Index , which fell 0.6% to 20,400.51. The index fell 3.3% for the week, its worst weekly fall since early June. The region has dropped for three straight weeks, as well as in 12 of the past 15 weeks.

Germany's DAX 30 lost 0.2% to end at 12,210.55. The DAX lost 1.7% over the course of the week; this was also its third straight down week, its longest stretch since February. France's CAC 40 fell less than 0.1% at 5,344.93, but it is down 1.3% on the week, its first three-week decline since June.

The U.K.'s FTSE 100 managed to end in positive territory, but just barely. It closed higher by less than 0.1%, ending at 7,558.59. (http://www.marketwatch.com/story/uk-stocks-gain-in-rebound-from-previous-sessions-drop-2018-08-16)The FTSE fell 1.4% over the week, a period that included its longest streak of daily declines since February (http://www.marketwatch.com/story/uk-stocks-gain-in-rebound-from-previous-sessions-drop-2018-08-16). The week's drop was its largest since March.

The euro rose against the dollar, changing hands at $1.1414, compared with $1.1378 late Thursday in New York. Thus far this year, the euro is down nearly 5% against the buck.

What is driving the market?

Italy's banking sector was in focus amid the county's budget concerns (http://www.marketwatch.com/story/italy-reminds-investors-to-sleep-with-one-eye-open-2018-06-05), with Banco BPM S.p.A.s stock (BAMI.MI) down 2.9% and shares of Unione di Banche Italiane SpA slumping 3.5%. UniCredit SpA shares (UCG.MI) ended down 0.5%.

Investors also continued to watch the ongoing currency crisis in Turkey, which has been a major driver of market losses of late.

Read:Why Turkey's currency crisis is rattling Europe bank stocks and the euro (http://www.marketwatch.com/story/turkeys-currency-crisis-underlines-europes-banking-woes-2018-08-13)

Late Thursday, U.S. Treasury Secretary Steven Mnuchin said the country could face additional U.S. sanctions over the detention of pastor Andrew Brunson, whose status has caused a diplomatic spat between the two. President Donald Trump subsequently traded that Turkey had "taken advantage of the United States for many years."

The Turkish lira had shown signs of recovering against the dollar following a recent plunge to a record low, but it fell more than 3% against the dollar on Friday, eroding much of its recent recovery.

Euro-area annualized inflation (http://ec.europa.eu/eurostat/documents/2995521/9105279/2-17082018-AP-EN.pdf/f1680451-6124-493f-9ba8-c38f47b69776) was 2.1% in July, up from 2.0% in June 2018, while month-over-month eurozone consumer-price inflation for July fell 0.3%, matching expectations.

What are market analysts saying?

Mnuchin's and Trump's comment "shows that the Turkish crisis is far from over. Whilst financial support from Qatar has helped stabilize the situation, Turkey remains a very real risk for the markets," wrote Fiona Cincotta, senior market analyst at City Index.

Marshall Gittler, chief strategist at ACLS Global who focuses on currencies, wrote that "it looks like people expect the turmoil to continue" in emerging markets. "In addition, European bank stocks continue to come under pressure as the market worries about their exposure to Turkey and other EM countries."

Gittler added that the "resulting fears about the Eurozone banking system may keep the [European Central Bank] on hold for longer than people had thought," which could pressure the euro going forward.

Which other stocks are in focus?

A.P. Moeller-Maersk A/S (MAERSK-B.KO) shares rose 1.8% after it reported its second-quarter results and said it would seek a separate listing for its drilling unit next year (http://www.marketwatch.com/story/maersk-seeks-listing-for-drilling-unit-shares-up-2018-08-17).

Rovio Entertainment Oyj's stock (ROVIO.HE), the developer behind the mobile game "Angry Birds," rose 0.6% after it reported a drop in its second-quarter earnings but stood by its full-year outlook (http://www.marketwatch.com/story/rovio-shares-rise-after-results-outlook-2018-08-17).

Royal Bank of Scotland Group PLC (RBS.LN) said Ewen Stevenson, the firm's chief financial officer, would be stepping down on Sept. 30 (http://www.marketwatch.com/story/rbs-cfo-to-leave-sept-30-names-interim-cfo-2018-08-17). Katie Murray, its deputy chief financial officer, will take over the role on an interim basis while a search for a permanent successor is performed. Shares gained 0.1%.

Koninklijke Vopak N.V.'s stock (VPK.AE) fell 6.4% after it reported a drop in its second-quarter earnings and revenue (http://www.marketwatch.com/story/vopak-reports-drop-in-q2-earnings-2018-08-17).

(END) Dow Jones Newswires

August 17, 2018 12:20 ET (16:20 GMT)

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