European shares fall on mounting concerns over rising interest rates

Investors betting on bigger rate hikes from Fed as US inflation tops 8.3%

European stocks fell on Thursday amid mounting concerns about the effect of rising interest rates on economic growth.

The continent-wide Stoxx 600 index slid 0.8 per cent, reversing much of the midweek gains. Technology, automakers and mining stocks were the top losers among sectors.

The Iseq index in Dublin dropped 0.9 per cent to 6,912.74. Investors are betting on bigger rate hikes by the US Federal Reserve after figures released on Wednesday showed that inflation in the world's largest economy was running at a higher-than-expected 8.3 per cent in April.

European Central Bank policymakers have also been out in force in recent days signalling that euro-zone deposit rates are set to rise in July for the first time in a decade.



FBD stood out as a weak spot, declining by 2.7 per cent to €9.34, as the insurer highlighted the effect on volatile financial markets in recent months on its investment portfolio as well as the spectre of general inflation driving up the costs of settling property and motor claims.

Cairn Homes was also in focus, declining 0.2 per cent to €1.04, as its chief executive, Michael Stanley, said looming interest rate increases posed a challenge to families hoping to buy their first house. Rival Glenveagh Properties dropped 1.7 per cent to 97c.

Bucking the trend, AIB advanced 1.4 per cent to €2.16, though peer Bank of Ireland was out of sorts, dropping 2.6 per cent to €5.26 as investors fretted about its high exposure to a weakening UK economy.


London shares dropped as risk appetite shrank after data showed the UK economy deteriorated in March, and persistently hot US inflation data exacerbated investors’ fears of aggressive rate hikes.

The blue-chip FTSE 100 closed 1.6 per cent lower, while the domestically-focused mid-cap index slipped 0.9 per cent.

Oil majors BP and Shell fell 4.7 per cent and 3.3 per cent, respectively, while miners declined 3.9 per cent, tracking the drop in commodity prices on demand concerns and recession fears.

Data showed the UK’s economy unexpectedly shrank by 0.1 per cent in March, but expanded by 0.8 per cent for the first quarter of 2022 as a whole, in what is likely to have been a high point for 2022 as the cost-of-living crisis increasingly bites.

BT Group rose 1.0 per cent after the broadband and mobile operator said it had finalised the deal to combine its sports broadcasting unit with Discovery.

Shares of Rolls-Royce rose 1.1 per cent as the engine manufacturer said it traded in line with estimates in the first four months of the year.


Worries about monetary policy tightening, an economic slowdown in China and surging inflation have stoked worries about recession, pushing the Stoxx 600 to shed 6.7 per cent so far in May even though first-quarter earnings have been largely supportive.

Adding to worries, Russian gas flows to Europe via Ukraine fell by a quarter after as Kyiv halted use of a major transit route, the first time exports via Ukraine have been disrupted since the invasion.

Siemens fell 2.5 per cent after it said it would quit the Russian market due to the war in Ukraine, taking a €600 million hit to its business during the second quarter.

Franco-Italian chipmaker STMicroelectronics gained 4 per cent even as it forecast more than $20 billion (€19.3 billion) in annual sales by 2027 at the latest.

New York

Wall Street’s main indexes were lower in early afternoon trading, weighed down by concerns that aggressive interest rate increases to curb decades-high inflation could tip the economy into recession.

Traders are pricing in a 61 per cent chance of a 0.75 percentage point hike by the Fed in June.

Investors are worried that surging inflation coupled with the Fed’s policy moves, the war in Ukraine and latest Covid-19 lockdowns in China could spark a global economic slowdown.

Growth stocks Alphabet, Tesla, Microsoft, Apple and Nvidia were all in negative territory.

Consumer discretionary bucked the trend to rise 0.9 per cent as Kate Spade owner Tapestry soared 15.1 per cent on expectations of a demand recovery in its key market of China. – Additional reporting, Reuters

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times