Europe: Shares fall on inflation concerns, profit taking

[BENGALURU] European shares fell 1 per cent on Wednesday, reversing course after hitting one-month highs earlier in the session as a jump in oil prices added to lingering concerns over the economic impact of the Ukraine crisis and as traders took profits.

The pan-European Stoxx 600 index fell 1.0 per cent, breaking its five day winning streak, with financial stocks leading losses.

Banks fell 2.1 per cent, led by a 9.0 per cent drop in Sweden-based Skandinaviska Enskilda Banken AB as it traded ex-dividend.

Energy stocks rose 2.0 per cent, boosted by a jump in oil prices as weather-related disruption to Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) pipeline added to worries over tight global supplies.

"In Europe, the commodity price rises that have been unleashed by the invasion of Ukraine have hit growth and also hit inflation and that is weighing today," said Susannah Streeter, markets analyst at Hargreaves Lansdown.

"Also, there is always a certain amount of profit taking when you have seen these consecutive sessions of gains, as well as the sensitivity to inflation readings in UK, the direction of interest rates and the ongoing uncertainty surrounding Ukraine."

The benchmark Stoxx is now more than 8 per cent away from record highs hit earlier this year as investors worry about inflationary risk fuelled by surging commodity prices due to sanctions on Russia.

US President Joe Biden headed to Europe for an emergency Nato summit on Ukraine, four weeks into Russia's invasion.

"Investors are also eyeing this meeting between U.S. and European leaders and looking at the possibility of increasing and tightening the sanctions, so there's a bit of a wait and see approach as well," added Streeter.

Spain's IBEX fell 1.9 per cent, while Germany's DAX and France's CAC 40 declined 1.3 per cent and 1.2 per cent.

The UK's commodity-heavy FTSE 100 slipped 0.2 per cent but outperformed its continental peers despite data on Wednesday showing that British inflation shot up by a faster than expected 6.2 per cent last month and Finance Minister Rishi Sunak's budget update failing to soothe nerves.

The Euro Stoxx 50 volatility index, Europe's main gauge of stock market anxiety, was on track for its biggest percentage gain in nearly three weeks.

Among individual stocks, global consumer internet group Prosus NV fell 4.8 per cent on a target price cut from Morgan Stanley. REUTERS