European Shares Dip as Automakers and Luxury Goods Suffer

European shares fell on Friday following a previous session rally driven by the U.S. Federal Reserve's interest rate cut. Mercedes-Benz shares plunged after reducing its profit outlook, impacting the German market. Consumer confidence in the UK hit a six-month low, contributing to the decline in the FTSE 100. Investors await euro zone's consumer confidence data for September.

European shares dropped on Friday post a rally prompted by the U.S. Federal Reserve's significant interest rate cut. Mercedes-Benz shares saw their worst decline in 15 months after the automaker slashed its core profit outlook, dragging the German benchmark down 0.8%.

The pan-European STOXX 600 index fell 0.4% to 519.76 points by 0805 GMT, though it remains on track for a second consecutive week of gains. Spain's market was the only major European market showing a positive trend, edging up 0.1%.

The automobile sector experienced a 2.9% downturn, largely due to Mercedes-Benz's 7.6% share decline after revising its profit margin for the second time in less than two months, citing a drop in sales volume in China. Additionally, Europe's luxury goods sector dipped more than 2% after Jefferies noted minimal improvement for the market in the year's second half.

Technology and personal goods shares also fell 1.1% and 1.5% respectively. In the UK, the FTSE 100 declined 0.5% following a survey showing consumer confidence plunged to a six-month low. Kathleen Brooks from XTB highlighted a sharp decrease in consumer confidence regarding personal finances and willingness to make large purchases.

British retail sales, however, rose by a stronger-than-expected 1% in August against a forecasted 0.4% monthly increase. Investors now turn their focus to the euro zone's consumer confidence data for September, expected at 1400 GMT, for further insights into the regional economy's health.

Amid other movements, Novo Nordisk advanced 0.5% after the European Medicines Agency endorsed its popular drug Wegovy for heart failure treatment in obese individuals. Meanwhile, UK's Burberry's stock fell 4.6% as Jefferies downgraded its rating to 'underperform' from 'hold' and reduced the target price significantly.

(With inputs from agencies.)