European shares slide to 14-week low amid fresh hike fears

European shares slid on Thursday to their lowest level in three months as a very strong US employment report and noises from the Federal Reserve the previous day stoked fresh fears that interest rates will remain higher for longer in the world’s largest economy.

A survey showed US private payrolls increased more than expected in June, indicating the labour market remained strong despite growing risks of a recession from higher rates.

Investor sentiment was also sapped by a hawkish tone in the minutes from the US Federal Reserve’s June meeting released on Wednesday. The pan-European Stoxx 600 index deepened losses by the close to fall 2.3 per cent to its lowest level since late.

Dublin

The Iseq All Share index lost 3.3 per cent to 8,399.70, with home builders standing out as the main decliners, in line with the property sector globally, as investors focused on interest rates. Cairn Homes lost 3.4 per cent to €1.08, while Glenveagh Properties declined by 3.6 per cent to €1.06.

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While the interest income of banks tends to grow in an environment of rising interest rates, the sector was out of sorts on Thursday as investors fretted about what a prolonged period of higher costs might mean for the creditworthiness of households and businesses. AIB lost 1.7 per cent to €3.82, while Bank of Ireland declined by almost 2 per cent to €9.

Industrial stocks were also under pressure, with CRH losing 2.8 per cent, while Smurfit Kappa declined by 2.2 per cent.

London

The UK’s FTSE 100 closed down 2.2 per cent in tandem with a sell-off in global equities, as jitters around rising interest rates held firm.

Meanwhile, US treasury secretary Janet Yellen’s first trip to China will be on investors’ radar as she is likely to focus on recalibrating ties between the world’s two largest economies after Beijing’s new restrictions on exports of some metals sparked tensions.

China-exposed banks HSBC and Standard Chartered fell 1.8 per cent and 2.6 per cent respectively.

All major UK sectoral indices traded in the red on Thursday, with retailers leading the declines, dragged down by a 9.7 per cent fall in Currys. The electrical goods retailer fell to its lowest in more than 20 years on concerns about the economic outlook in its markets and following a 38 per cent drop in its full-year profit.

Among the rare bright spots was United Utilities, up 1.5 per cent after Morgan Stanley raised the water utility firm’s rating to overweight, the equivalent of a buy recommendation.

Europe

Technology stocks fell 3 per cent, while the property sector tumbled 4.2 per cent.

German industrial orders rose significantly more than expected in May, due to large scale orders of ships, spacecraft and military vehicles.

Embracer, the top loser on the Stoxx 600, fell 13.8 per cent after the Swedish gaming group raised the equivalent of about €167 million a share issue directed to institutional investors.

In a bright spot, Italy’s FinecoBank rose 6 per cent after the asset gatherer saw €765 million in inflows in June as cash flows out of deposits and into assets under management products.

New York

Wall Street shares were also lower in early afternoon trading as US interest rate futures saw an increased probability of another rate hike by the Federal Reserve in November.

US bank stocks fell and the KBW Regional Banking Index hit a near two-week low amid lingering worries about the health of lenders in the aftermath of the crisis in regional banks and in advance of second-quarter results that start next week.

Meta Platforms slipped, but still outperformed peers after the Facebook parent took an aim at Twitter with its Threads app, attracting millions of users within hours of its launch on Wednesday.

Exxon Mobil shares dropped on signalling a sharp drop in second-quarter operating profit as natural gas prices and oil refining margins ease, according to a regulatory filing. – Additional reporting: Reuters