European markets drop 1.8% as investors digest string of interest rate hikes

Travel and tech stocks fall, with mining companies among the few to make gains

European shares slumped 1.8 per cent on Thursday, as recession worries heightened after the US Federal Reserve delivered another jumbo-sized interest rate hike.

The Fed signalled more hikes to come after announcing its third 75 basis points rate increase of the year late on Wednesday, with policymakers sounding less hopeful than previously of a soft landing for the US economy.

Markets have had to reckon with several central bank decisions this week, including hawkish moves from the United Kingdom, Sweden and Switzerland, and intervention in Japan.

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Dublin

The Iseq fell almost 1.8 per cent, dragged down by a 2.7 per cent drop for CRH, with the building materials group declining amid economic concerns in the US. On a weak day for airlines, Ryanair slid 2.2 per cent to €11.59.

Bank of Ireland climbed 3.1 per cent, adding to Wednesday’s 2.1 per cent gain, which came after Minister for Finance Paschal Donohoe said he expects to announce soon that the State’s stake has fallen to zero. AIB nudged up about 0.2 per cent to €2.56. But there were few other significant gainers, with Flutter Entertainment sliding 3.5 per cent to €112.00 and packaging group Smurfit Kappa edging down 0.4 per cent to €31.11.

London

UK shares fell on Thursday, with the mid-cap index touching the lowest in more than two months on recession fears after the Bank of England joined several global central banks in hiking interest rates to tame inflation. The blue-chip FTSE 100 index closed down 1.1 per cent at a three-week low, while FTSE 250 index, more exposed to the domestic economy, fell 2.1 per cent.

The Bank of England raised its key interest rate to 2.25 per cent from 1.75 per cent and said it would continue to “respond forcefully” to inflation as needed even though the economy risks being in a shallow recession already.

Capping some of the losses on the commodity-heavy FTSE 100, mining stocks such as Glencore, Rio Tinto and Anglo American rose between 0.8 per cent and 2.3 per cent as metal prices gained on a weaker dollar and optimism that stimulus measures would boost demand in top metals consumer China.

JD Sports fell 8.4 per cent after the sportswear retailer reported lower profit for the first half.

Europe

The pan-European STOXX 600 index hit its lowest since February 2021 led by rate-sensitive tech and real estate stocks which fell more than 4 per cent each, with the latter hitting over two-year lows. In Frankfurt, the Dax dropped 1.8 per cent, while the Cac 40 in Paris was down almost 1.9 per cent, as investors tried to digest various central bank moves of the previous 24 hours.

Travel and leisure stocks slid 3.2 per cent, with French hotel group Accor tumbling 6.9 per cent after JP Morgan downgraded to “underweight” on concerns about profitability.

Spanish bank Sabadell rose 5 per cent after it received indicative bids from France’s Worldline, Italy’s Nexis and US firm Fiserv for its payments arm, which sources said was valued at up to €400 million.

US

Technology and financial stocks pulled Wall Street’s main indexes lower for a third straight session, as investors worried that the Federal Reserve’s aggressive approach to rein in inflation could trigger a recession.

Nine of the 11 major S&P sectors declined, led by a drop of 2 per cent in consumer discretionary and 1.5 per cent in financial stocks.

Shares of mega-cap technology and growth companies such as Apple, Amazon, Tesla and Nvidia fell between 1 per cent and 4 per cent as benchmark US Treasury yields hit an 11-year high.

Darden Restaurants slid 4 per cent after the Olive Garden parent reported downbeat first-quarter sales. Eli Lilly and Co gained 3.9 per cent after the FDA approved its drug Retevmo for the treatment of advanced tumour and non-small-cell lung cancers.

Additional reporting: Reuters

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics