Europe: Shares end lower on rate cut jitters; Richemont shines
EUROPEAN shares closed lower on Friday, as investors turned cautious following remarks from a policymaker on the outlook for monetary policy, while Richemont logged its best day in over three months after announcing a management rejig.
The pan-European Stoxx 600 dipped 0.1 per cent, with the rate-sensitive real estate sector among top decliners, pressured by higher euro zone bond yields.
A report showed European Central Bank board member Isabel Schnabel advocated caution about further interest rate cuts after a likely first one in June, bringing uncertainties about the outlook for rate reductions to the fore.
On the data front, a final reading of euro zone inflation confirmed a previous report that showed prices increased 2.4 per cent on an annual basis in April.
ECB policymakers have not offered clarity on the outlook of rate cuts beyond June, while US Federal Reserve policymakers have not openly shifted their views about rate cut timing despite recent encouraging US economic data.
“The market is in a good place in medium term. Central banks are doing what they can and they still want to cut this year, but just very steadily,” said Chris Beauchamp, chief market analyst at online trading platform at IG.
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“The worry is if inflation starts to move higher, so that’s one thing to keep an eye on, particularly heading into June and beyond.”
The main equities index managed to end its second straight week in gains, rising for nine straight sessions till Wednesday, as a robust earnings season offered a fresh boost to the prevailing upbeat investor sentiment.
According to LSEG data, of the 239 companies in the Stoxx 600 that have reported quarterly earnings as of Tuesday, over 60 per cent have exceeded analyst estimates, more than a long-term average of 54 per cent.
Azelis fell 13 per cent to notch its worst day on record after major shareholders EQT Partners and PSP Investments sold shares in the specialty chemicals maker.
Nibe lost 11.9 per cent and bottomed the Stoxx as Citigroup downgraded the Swedish heat-pump maker to “neutral” from “buy”.
On the flip side, Switzerland’s main index outperformed, driven by a 5.3 per cent in Richemont after the luxury company reported what Jefferies analysts described as “reassuringly resilient” fourth-quarter results, and naming Nicolas Bos as group CEO. The broader luxury sector was up 1 per cent.
German’s main index was flat, with utility firm E.ON down 5.2 per cent on trading ex-dividend.
Lagercrantz Group AB jumped 5.3 per cent to top the Stoxx 600 after fourth-quarter earnings, while H&M rose 3.4 per cent after RBC upgraded the fashion retailer to “outperform” from “sector perform”.
French re-insurer Scor dropped 6 per cent after first-quarter results missed expectations.
Investors also await ratings agency Fitch’s review of Spain’s credit rating. REUTERS
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