Europe: Shares deepen fall on inflation worries

EUROPEAN shares slipped on Wednesday led by technology stocks as worries about inflation and monetary policy tightening dampened optimism around China’s economic recovery, while shares of UniCredit and Commerzbank rose. The pan-European Stoxx 600 index fell 1.1 per cent after rising a little more than 3 per cent since Friday. Technology shares slipped 2.7 per cent, while a fall in copper prices weighed on basic material stocks. Data on Wednesday showed British consumer price inflation hit 9 per cent in April, its highest level on record, inching closer to the Bank of England’s prediction of above 10 per cent later this year. “Worries about recession reared up again after UK inflation jumped to the highest level in 40 years,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Landsdown. Euro zone inflation held steady at a record high 7.4 per cent in April, driven by soaring fuel and food costs, the EU’s statistics agency said, lowering its estimate from a preliminary 7.5 per cent. The European Central Bank is set to hike rates shortly after ending its bond-buying programme early in the third quarter, with the potential for further hikes in coming quarters, echoing a strategy similar to the US Federal Reserve. “For the first time overnight index swaps were pricing in that the ECB would hike by more than 100bps by their December meeting,” said Deutsche Bank strategist Jim Reid. A rise in optimism on Tuesday, after falling Covid-19 cases in China drove hopes of more economic activity, proved short-lived. The Stoxx 600 is in on course to end lower in May, having marked gains only in March this year. But with a 11 per cent decline year-to-date, the index has still fared better than the S&P 500 and MSCI’s All Country index, which are down more than 14 per cent over the same period. In earnings, Euronext rose 3.9 per cent on record quarterly revenue. Dutch bank ABN Amro topped profit estimates but shares fell 11.9 per cent as it warned about the impact of the war in Ukraine. Siemens Gamesa jumped 12.6 per cent, after sources said Siemens Energy is preparing to buy the remaining stake in the wind turbine maker. The stake is worth 3.14 billion euros (S$4.6 billion). Germany’s Commerzbank AG rose 3.1 per cent, while Italy’s UniCredit SpA gained 2 per cent after a report spoke of scheduled merger talks before the potential deal was abandoned because of the Ukraine war. Holiday group TUI tumbled 12.6 per cent after it announced a share sale to repay elements of a German state bailout it received during the pandemic. REUTERS