Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

European shares suffer worst selloff of the year on recession fears

Published 01/19/2023, 03:44 AM
Updated 01/19/2023, 12:19 PM
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 12, 2023.    REUTERS/Staff
RENA
-
STOXX
-

By Ankika Biswas, Bansari Mayur Kamdar and Sruthi Shankar

(Reuters) -European shares recorded their worst single-day selloff of the year on Thursday, as disappointing earnings reports, weak U.S. economic data and hawkish comments from central bankers rekindled fears of a global economic slowdown.

The pan-European STOXX 600 index fell 1.6%, breaking a six-day winning streak and marking its biggest percentage loss since December 15.

Rate-sensitive technology stocks led losses in the region, down 2.9%, as their Wall Street peers also dropped. Retail, industrial, mining and oil & gas all fell more than 2% each.

U.S. stocks tumbled for a second day after data showed U.S. manufacturing output slumped last month and retail sales dropped by the most in a year, while hawkish comments from Federal Reserve officials sparked worries that interest rates will keep rising. [.N]

"Has global inflation peaked? It certainly seems so, with CPI numbers across most major economies declining slightly month-on-month, helping to ease fears of a global recession," said Geir Lode, head of global equities at Federated Hermes (NYSE:FHI).

"However, despite a glint of optimism about the health of the global economy, we worry that this upcoming earnings season could bring more pain for investors. We expect the inflationary environment over the previous quarter to impact corporate profitability, which could lead to negative surprises across the board, especially in the U.S."

Spain's Bankinter slipped 2.9% as the lender hit its net profit target in 2022, a year ahead of schedule, though higher costs took some of the shine off a strong final quarter.

Boohoo fell 10.5% after the British online fashion retailer's revenue fell 11% in its key Christmas trading period, hurt by delivery disruption and tough comparatives.

Dr Martens Plc slumped 30.7% to a record low after the British bootmaker warned on annual profit and revenue due to operational issues.

Fourth-quarter earnings in Europe are expected to increase 10.7% year-over-year, according to Refinitiv I/B/E/S data, compared with 59.2% jump in the year-ago quarter. Further earnings deterioration is forecast this year amid worries of a recession.

Adding to the downbeat mood, the European Central Bank pushed back against market bets that it would slow the pace of its interest rate hikes.

ECB President Christine Lagarde and fellow policymaker Klaas Knot said investors were underestimating the central bank's determination to bring inflation in the 20-nation euro zone back to its 2% target, from 9.2% last month.

While a 50-basis-point hike by the ECB for February is fully priced in, traders are oscillating between 25 and 50 bps rate hike for March on hopes of less-aggressive moves by the Fed.

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 12, 2023.    REUTERS/Staff

Among other stocks, Renault (EPA:RENA) slipped 2.1% as HSBC cut the French carmaker's stock rating to "hold" from "buy".

Zur Rose fell 2.2% even as the Swiss online drug retailer said it expected a smaller full-year core loss than previously forecast.

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.