The IBEX 35 opened with a 1% cut on Friday and was slightly below 11,200 points for the first time since mid-May, as the prospect that interest rates will end the year at higher levels than previously expected by the market gained weight.

The cooling of bets on debt cost cuts was accentuated in the last hours after the publication of indicators that reinforced the perception of strength in the European and US economies.

"Rising wages and solid PMIs (especially US) do not give reasons for rate cuts in the short term by central banks, except for the one discounted by the market from the ECB next June 6," Bankinter said in a daily report for clients.

According to interest rate futures in LSEG's IRPR tool, markets currently expect a total of 41 basis points of rate cuts this year, which is just under two 0.25 basis point cuts. In mid-May, market expectations were for just over 50 basis point cuts for the year as a whole.

IRPR now calculates a 53% chance of the first rate cut in September--up from 70% at the end of last week.

Hopes for a horizon of cheaper money prices also moderated in Europe, where Danske Bank said Friday that it now expects the European Central Bank to cut interest rates only twice this year, not three times, marking the first revision to the bank's forecasts in more than a year.

Bankinter analysts point out that, in any case, the focus shifts to next week, when US Q1 GDP (Thursday) will be published "probably revised down (+1.2% vs. +1.6% preliminary), which would be rather good for stocks and bonds, and European inflation (Friday) picking up (+2.6% from +2.4%), which would influence in the opposite direction, cooling the expectation (very firm at this point, by the way) that the ECB will cut rates on June 6".

Next week there will also be interest in the US consumer deflator (Friday, May 31), while this Friday the only major references to be published will come from the US, namely durable goods orders and consumer confidence from the University of Michigan.

Analysts at Sabadell also attributed Friday's cut to profit-taking in technology, following the rally inspired by Nvidia's results, and the rebound in yields in the fixed-income market as a result of the move away from rate cuts.

At 07:15 GMT on Friday, Spain's IBEX 35 was down 139.50 points, or 1.23%, to 11,171.60 points, its lowest level since May 13, while the FTSE Eurofirst 300 index of large European stocks was down 0.83%.

For the week as a whole, the IBEX 35 shows a decline of 1.38%.

In the banking sector, Santander lost 1.60%, BBVA fell 1.21%, Caixabank dropped 1.06%, Sabadell fell 0.60%, Bankinter dropped 1.56% and Unicaja Banco lost 1.56%.

Among the large non-financial stocks, Telefónica fell 0.96%, Inditex dropped 0.54%, Iberdrola dropped 1.28%, Cellnex fell 1.79%, and the oil company Repsol lost 0.80%.

Acciona fell by 7.05%, after cutting its gross operating profit forecast for this year, and Sacyr, which announced a capital increase and fell by almost 7%.

(Information by Tomás Cobos; edited by Javi West Larrañaga)