Europe: Stocks skid on inflation angst as oil jumps

[BENGALURU] Automakers, retail and travel shares fell more than 2.5 per cent on Wednesday, leading declines across all major sectors in Europe as soaring oil and gas prices intensified concerns inflation will dent economic growth.

The pan-European Stoxx 600 index fell 1 per cent, giving back almost all of the gains made on Tuesday.

Dutch and British wholesale gas prices hit record highs on Tuesday amid wider energy market price hikes.

"The euro-area is one of the biggest losers (from the spike in natural gas prices) in the developed world with a current account deterioration potentially approaching 2 per cent of GDP," Deutsche Bank said in a note.

"Recent moves could potentially wipe out Europe's trade surplus if they persist."

A global energy crunch, labour shortage and other supply chain constraints have weighed on a global economy recovery when major central banks are considering easing the massive pandemic-era stimulus. The Stoxx 600 is down about 5.5 per cent since hitting a record high in August.

"The question is whether central banks are going to act on this from an inflation perspective, which is set to go higher, or from a growth perspective, which is set to go lower," said Bert Colijn, senior economist at ING.

Germany's DAX dropped 1.5 per cent after data showed German industrial orders fell more than expected in August on weaker demand from abroad following two months of unusually strong gains.

An index of European banks slipped 0.2 per cent, but was among the smallest decliners on prospects of higher interest rates as US and European government bond yields climbed and oil prices hit multi-year highs.

With the third-quarter earnings season looming, analysts are anticipating a near 46 per cent rise in profit for companies on Stoxx 600, boosted by energy and industrial companies, according to Refinitiv IBES data. That follows a 152.6 per cent jump in the second quarter and a 25 per cent decline in the year-ago quarter.

Tesco jumped almost 6 per cent as Britain's biggest retailer raised its full-year outlook and launched a £500 million (S$923.2 million) share buyback programme.

Britain's HSBC rose 3.4 per cent after UBS upgraded the stock to "buy", while Germany's Commerzbank gained 1.9 per cent after the wider sector rallied 3.5 per cent in the previous session.

Laggards included German software firm TeamViewer which sank 25 per cent after it reported quarterly results below its own expectations and cut full year guidance.

Deutsche Telekom fell 5.4 per cent after Goldman Sachs sold shares worth 1.58 billion euros (S$2.48 billion) in a SoftBank structured finance deal.

REUTERS