Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Muted start to new quarter for European equities as recession worries weigh

Published 07/01/2022, 03:23 AM
Updated 07/01/2022, 12:31 PM
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 29, 2022.    REUTERS/Staff
C
-
GASI
-
EXHO
-
MU
-
STOXX
-
IFNNY
-

By Devik Jain

(Reuters) -European shares closed flat on Friday as gains in defensives countered a sell-off in semiconductor and commodity-linked stocks, while investors prepared for the European Central Bank's (ECB) first interest rate hike in over a decade this month.

Data on Friday showed euro zone inflation came in higher than expected and hit yet another record high in June. That firmed the case for an ECB rate hike as the inflation peak could still be months away.

Aggressive central bank moves to curtail inflation have left investors worried about the likely hit to economic growth. The STOXX 600 lost 1.4% this week and has shed more than 16% this year, as worries from stubborn inflation to China's slowing economy and Russia's invasion of Ukraine curbed risk appetite.

"The door is open for (the ECB) to being significantly more aggressive to try and stand down on inflation," said Michael Brown, head of market intelligence at Caxton.

The continent-wide STOXX 600 index cut session losses of up to 1%, a day after marking its worst quarter since the pandemic-led selling of early 2020 and tracking a dour Wall Street session. [.N]

Most major European bourses ended in positive territory.

"What we could be seeing (in markets) is a little bit of a dead cat bounce after yesterday's pretty steep losses rather than a move that's explicitly tied to that inflation data," Brown said.

Dutch semiconductor equipment maker ASML, Franco-Italian chipmaker STMicroelectronics and German chipmaker Infineon (OTC:IFNNY) slid between 2.9% and 5.4% after U.S. memory-chip firm Micron Technology (NASDAQ:MU) gave a significantly weaker-than-expected business outlook on Thursday.

Europe's technology index slumped 2.0%. Miners lost 2.5% and oil and gas firms also slid as commodity prices fell on worries about economic growth.[O/R] [MET/L][IRONORE/]

Utilities were the biggest sectoral gainers, up 3.1% as Uniper recovered after plunging more than 14% on Thursday when it asked the German government for help due to losses arising from Russian gas restrictions.

Other defensive sectors such as consumer staple stocks, telecoms and healthcare also rose as investors sought to hedge amid recession worries as data showed weak factory activity in Spain and Italy.

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 29, 2022.    REUTERS/Staff

Among other stocks, La Francaise des Jeux (FDJ) slid 4.7% after Citigroup (NYSE:C) downgraded the French lottery group's stock to "sell" from "buy".

Shares of Sodexo (EPA:EXHO) gained 4.1% after the French catering and food services group reported better than expected third-quarter revenue.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.