European stocks end flat as weak defensives outweigh tech gains

European stocks were muted on Thursday as losses in defensive sectors were matched by gains in automakers and technology stocks on hopes of improving semiconductor supply. A recent rise in bond yields weighed on most defensive sectors as investors expected rising inflation to prompt monetary policy tightening across the developed world this year.

European stocks could struggle to see major rallies with the looming prospects of higher rates, said Equiti Capital analyst David Madden. "We're going to see some companies, particularly in the retail space, manufacturing sectors, start talking about lower margins."

DUBLIN

After rising 7 per cent on Wednesday, Cairn Homes rose a further 4 per cent to €1.30. The homebuilder's stock appreciated this week after it pledged to return €95 million to investors by way of share buybacks. European bank stocks rose, reaching a more than three-year high on the prospect of higher lending rates.

Bank of Ireland and AIB rose by 2.4 per cent to €2.60 and by 0.5 per cent to €5.83. Ryanair also traded strongly, climbing by 1.6 per cent to €16.81 as experts predicted an easing of the current Covid wave and the possible loosening of restrictions.

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Insulation manufacturer Kingspan was marginally up at €99.02 while Paddy Power Betfair owner Flutter was slightly down on the day at €137.75.

LONDON

London's FTSE 250 index slipped on Thursday, dragged down by shares of Countryside Properties and Marks & Spencer, while a rise in heavyweight financial and commodity stocks helped the FTSE 100 edge higher. The domestically focused mid-cap index closed 0.4 per cent lower, with homebuilder Countryside Properties dropping 20.6 per cent to the bottom of the index after a disappointing trading update and as its chief executive stepped down.

Marks & Spencer slipped 7.9 per cent after the retailer nudged up its full-year forecast for profit before tax to be at least £500 million versus a prior estimate of about £500 million. Laura Hoy, an analyst at Hargreaves Lansdown, said M&S shares had "climbed markedly higher since the start of the pandemic, and it will take a lot more than a nudge to profits to sustain those expectations".

Tesco, Britain's biggest retailer, also raised its profit outlook on stronger-than-expected Christmas sales but, along with other retailers, it warned of pain to come from higher freight costs, wage hikes for warehouse workers and more expensive raw materials.

EUROPE

Swiss manufacturing group Geberit slipped 4.1 per cent, taking the construction sector lower after it said increased uncertainty made it impossible to provide outlook for 2022, and that the construction market remained fragile.

Automakers were the best performers for the day, up 1.8 per cent after TMSC, the world's largest contract chipmaker, posted a record quarterly profit and flagged plans to ramp up production. A chip shortage had forced several carmakers to cut production through last year, weighing on auto sales.

Among other stocks, Germany's largest solar group SMA Solar Technology dropped 8.1 per cent after a second forecast cut for 2021. Food ingredients maker Chr Hansen rose 6.7 per cent after reporting quarterly organic revenue growth well above forecasts.

NEW YORK

Wall Street’s main indices fell on Thursday, dragged down by declines in megacap growth stocks, while a slower rise in producer prices in December spurred hopes that inflation has potentially reached its peak. Six of the 11 major S&P 500 sectors fell, with technology leading the declines.

Pressuring the Nasdaq and the S&P 500 by midday were declines in Tesla, Microsoft, Meta Platforms and Apple.

"It's going to be a choppy first quarter, and you're going to see that the market is going to struggle until we get beyond that first Fed rate hike," said Edward Moya, senior market analyst at Oanda in New York. Companies will report results on the final quarter of 2021 in the coming weeks.

Banks JPMorgan Chase, Citigroup and Wells Fargo are due to report on Friday, while big technology and other megacap companies start next week. – Additional reporting by Reuters