European shares slumped 2.7 per cent on Friday after US inflation data came in hotter than expected, raising the prospect of a recession as central banks try to put a lid on prices.
US headline inflation for May came in at 8.6 per cent, topping an expected 8.3 per cent, suggesting that the Federal Reserve could continue with its 50 basis points interest rate hikes through September to combat inflation. The Fed’s take on inflation at its meeting next week will be closely watched.
Equities had been hammered on Thursday after the European Central Bank said it would deliver next month its first interest rate hike since 2011, and a potentially larger move in September.
DUBLIN
The Iseq index declined 3.6 per cent in a negative end to the trading week as investors digested economic data and the imminent tightening of monetary policy in the euro zone. Bank of Ireland was one of the biggest fallers in percentage terms, plunging 7.6 per cent to €6.05 at the close, while AIB was down almost 3.9 per cent at €2.40, as bank stocks across Europe lost ground.
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Building materials group CRH sank 6.1 per cent to €35.28 amid gloomier sentiment, while Paddy Power owner Flutter Entertainment finished 4.8 per cent lower at €100.80. It was also a weak session for Ryanair, which shed 3.5 per cent to €12.84, and packaging group Smurfit Kappa, which slipped 3.7 per cent to €34.73, while Dalata Hotel Group lost 2.9 per cent to close at €4.23.
One of the only gainers of note was agri-services group Origin Enterprises, which added 6.3 per cent to finish at €4.64 on a day when it reported revenue growth of more than 50 per cent for the nine months to the end of April, despite a reduction in volumes in Ireland and Britain.
LONDON
British shares fell after the US inflation data exacerbated investors’ fears of aggressive rate hikes, while GSK rose as its respiratory vaccine succeeded in a late-stage trial for older adults.
The blue-chip FTSE 100 index was down 2.1 per cent recording its worst session in a month, while the domestically oriented FTSE 250 index declined 2 per cent. Mining stocks, down 5.6 per cent, led losses on the index as industrial metals retreated after renewed Covid-19 restrictions in China rekindled demand worries.
The Bank of England is likely to raise rates for the fifth time since December next week as near-10 per cent inflation, the worst cost-of-living squeeze in decades and planned labour strikes threaten a summer of discontent.
GSK rose 1.6 per cent after the drugmaker said its vaccine for respiratory syncytial virus was successful in a late-stage trial involving adults aged 60 years and older.
EUROPE
Losses on the pan-European STOXX 600 index were broad-based but led by a 4.8 per cent slide in banks. Italy’s MIB index sank 5.2 per cent to three-month lows. Spain’s IBEX gave up 3.7 per cent, while other big bourses in the region lost more than 2 per cent each.
Banks, already suffering from heavy losses in peripheral lenders such as those in Italy, accelerated losses on worries about widening spreads between bond yields in Italy and Germany.
Regional airlines fell as labour strife in Europe drove expectations of more travel headaches during the busy summer season, with German carrier Lufthansa declining 4.5 per cent.
NEW YORK
US stock indexes slid in early trading as consumer prices rose more than expected in May, dashing hopes that inflation is peaking and fanning worries about more aggressive steps by the Federal Reserve to tame it.
All the 11 big S&P sectors traded lower. Mega-cap stocks Microsoft and Apple dipped 3.3 per cent each, dragging indexes down, while Netflix slid 4.4 per cent after analysts at Goldman Sachs downgraded the streaming giant’s stock to “sell” from “neutral”.
Additional reporting: Reuters
