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STOXX 600 set for weekly drop of 0.8%

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Tech drags as investors reprice rate forecasts

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Renault climbs after buyback, UBS upgrade

(Updated at 0830 GMT)

By Sruthi Shankar

May 24 (Reuters) - European stocks lost ground on

Friday, putting them on course for weekly declines, as signs of

persistent U.S. price pressures and a recovering euro zone

economy dashed hopes of several interest rate cuts from major

central banks this year.

The pan-European STOXX 600 index dipped 0.5%, with

rate-sensitive tech stocks retreating after Thursday's

big gains. The benchmark was set for a weekly drop of 0.8%.

U.S. stocks closed sharply lower on Thursday as an initial

euphoria following upbeat outlook from chip giant Nvidia ( NVDA )

faded after economic data showed inflation was still a

concern, potentially delaying any Federal Reserve rate cuts.

"For the Fed, a cut in June has been priced out for a while,

but now even September looks quite questionable," said Joost van

Leenders, senior investment strategist at Van Lanschot Kempen.

"We still think that (a rate cut) is possible in September

and two or three for the whole year. But what the data basically

shows is that it's a very fine line for the Fed to get that soft

landing."

Traders are currently pricing in rate cuts of 37 basis

points (bps) from the Fed by the end of this year, as per the

LSEG's rate probabilities app, and 57 bps of cuts from the

European Central Bank. The odds have fallen since the start of

the year.

The German two-year bond yield hit its highest in

six months on Thursday after a survey showed euro zone business

activity expanded at its fastest pace in a year this month. It

traded just below those levels on Friday.

"When you look at Europe, the economy is improving a little

bit but not enough to really regenerate inflation. The outlook

is a bit more straightforward for those rate cuts," van Leenders

said.

Europe's technology shares took the biggest hit,

down 0.9%, followed by utilities and banks.

Shares of Renault rose 3.7% after the French

carmaker announced a share buyback plan and UBS upgraded the

stock to "neutral" from "sell".

Britain's National Grid rebounded about 9% after

Thursday's more than 10% plunge when it announced plans to raise

about 7 billion pounds ($8.9 billion).

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry

Jacob-Phillips and Mrigank Dhaniwala)