Europe: Stocks slide as automakers fear tougher emission standards

[BENGALURU] European shares fell on Friday (Feb 4), with automobile stocks hitting a one-month low on the prospect of tougher emissions tests, while a hawkish shift from the European Central Bank continued to rattle markets.

The pan-European Stoxx 600 closed 1.4 per cent lower, extending losses after a near 2 per cent drop in the previous session.

The index lost 0.7 per cent this week, despite initial gains on a positive earnings season.

Automobile stocks fell the most on Friday, down 3.2 per cent after Reuters reported the European Union plans to toughen its method for measuring carbon dioxide emissions from plug-in hybrid cars.

The move would mean automakers will be required to sell more battery-operated vehicles to meet emissions targets.

Regional stocks deepened their losses after data showed US payrolls rose more-than-expected in January, giving the Federal Reserve more space to tighten policy this year.

The Bank of England raised rates this week, while the ECB hinted at possible hikes this year, pushing up yields and pressuring markets as they face the end of pandemic-era liquidity measures.

"Inflation concerns are looming ever larger with the cost of living squeeze intensifying, as monetary policy tightening ramps up, and no let-up in soaring energy prices in sight," said Susannah Streeter, an analyst at Hargreaves Lansdown.

The prospect of higher rates has walloped technology stocks, with the index having lost more than 14 per cent this year.

Bank stocks were the best performers this week, up 2.4 per cent, given they benefit from a higher-rate environment.

German and Dutch 5-year bond yields turned positive for the first time since 2018.

Meanwhile, German industrial orders grew more than expected in December, data showed, with stronger domestic demand offering cause for optimism.

Among individual stocks, French home care operators Korian and Orpea slumped 16.8 per cent and 12.4 per cent, respectively, after a French investigational TV show host said more information on malpractice in the sector would be revealed soon.

Orpea has lost about half its value since the first extracts of the "Les Fossoyeurs" book alleging malpractice in its care homes were published on Jan 24.

Assa Abloy, the world's biggest lockmaker, gained 7 per cent after posting better-than-expected quarterly profit growth.

Danish brewer Carlsberg rose 0.5 per cent after posting quarterly sales above expectations, while Spanish power and gas group Naturgy fell 1.2 per cent despite a slight beat on its 2021 earnings guidance.

TomTom plunged 16.1 per cent after the Dutch navigation and digital mapping firm reported a bigger-than-expected quarterly core loss. REUTERS