Europe: Shares clock weekly decline as higher-for-longer rates loom

EUROPEAN shares closed lower on Friday (Sep 22), logging sharp weekly losses as investors grappled with the prospects of global interest rates remaining elevated for longer.

The pan-European Stoxx 600 index fell 0.3 per cent, touching its lowest in more than a week, with the construction and materials sector amongst the top decliners, down 1.0 per cent.

Europe’s benchmark stock index notched a weekly decline of 1.9 per cent as investors turned risk averse after major central banks across the world, including the US Federal Reserve and the Bank of England, hinted at keeping borrowing costs high for longer than expected.

Jitters about an economic downturn in the eurozone persisted after preliminary data showed a contraction in economic activity in France and Germany, while a reading of the broader bloc showed the continental economy is likely to contract this quarter and won’t return to growth anytime soon.

“Clearly, the medicine is working ... higher rates are starting to feed through to the economy,” economists at HSBC said in a note.

“With limited fears of a recession – at least of a major one – and resurgent energy prices, we think that for now, the European Central Bank will remain more focused on tackling inflation, maintaining its hawkish bias.”

In the United Kingdom, official figures showed British retail sales partially recovered in August after a rainy July washout, while a separate reading showed the economy displayed clear recession signals.

Eurozone banks dipped 1.4 per cent as Dutch banks ING Groep and ABN AMRO fell 6.4 per cent and 4.5 per cent, respectively, after Dutch lawmakers backed a higher tax on banks to cover an increase of the minimum wage and larger childcare support in 2024.

Helping limit losses, energy and mining companies rose 0.3 per cent each, tracking rising commodity prices.

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Europe: Shares slide as hawkish central banks spark interest rate jitters

Technology stocks added 0.8 per cent on Friday, though they logged a weekly decline of close to 2 per cent.

Meanwhile, Spain’s gross domestic product grew 0.5 per cent in the second quarter, the National Statistics Institute said, as it revised its July estimate up from 0.4 per cent growth.

Among individual stocks, AstraZeneca gained 1.5 per cent after the London-listed drugmaker said its experimental precision drug had slowed the progression of breast cancer in a late-stage trial.

Shares of eBay-backed online classifieds group Adevinta jumped 26.5 per cent after the Norwegian company said it had received a takeover proposal from a consortium led by Permira and Blackstone. REUTERS