Europe: Shares end week lower due to rate hike worries
EUROPEAN stocks logged weekly losses despite gaining on Friday (Sep 8), as investors fretted over a worsening outlook for the economy and the trajectory of US interest rates, while the focus shifts to central bank action next week.
The pan-European Stoxx 600 index added 0.2 per cent, snapping a seven-day losing streak, but declined 0.8 per cent for the week.
Luxury heavyweight LVMH added 2.2 per cent, its first gain in eight sessions, lifting the personal and household goods sector 1.1 per cent higher.
Europe’s travel and leisure sector rose 1.4 per cent after falling for the last three sessions.
Equity markets globally have come under pressure this week after upbeat US economic data fuelled expectations of interest rates staying higher for longer, while weak data from Europe and China raised concerns about the health of the global economy.
Despite the weak data, inflation concerns and hawkish remarks from the European Central Bank (ECB) policymakers have led money markets to increase their bets on a further rate hike in next week’s policy decision.
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“If you listen to the senior officials at the ECB, to some extent they’re mimicking what the Fed has been saying for quite a while now... the future decisions are data dependent,” said Alan Kinnaird, business development manager at Walker Crips Investment Management.
“They always like to keep the markets guessing.”
Traders have priced in an around 40 per cent chance of a 25 basis point (bps) hike, up from 20 per cent last week.
BofA Global Research said it expected the ECB to hike all three policy rates by 25 bps at its Sep 14 meeting.
Official data on Friday showed German inflation eased in August to 6.4 per cent. Separately, Germany’s DIW economic research institute slightly lowered its 2023 forecast for the German economy on Friday due to a surprisingly weak second quarter.
US inflation numbers are also due next week ahead of the Federal Reserve’s policy meeting later this month, with policymakers widely seen holding interest rates unchanged.
European banks bore the brunt of the selling pressure this week, falling over 2 per cent, while the media sector was the best performing.
Computacenter jumped 15.3 per cent after the IT service provider said its half-year adjusted profit before tax rose 8.8 per cent.
Covestro’s supervisory board is meeting on Friday to discuss whether to hold formal negotiations with suitor Abu Dhabi National Oil Company over the energy group’s takeover approach, a person familiar with the matter told Reuters. Shares of the German company jumped 7.8 per cent. REUTERS
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