European stocks fall as recession worries mount – Markets
European energy and physical shares fell nearly 6% on Friday, pushing the broader index of regional stocks to a two-year low, as disappointing euro zone data pointed to an economic slowdown, prompting central bank moves. But the concern increased.
UK shares fell 2% after British Finance Minister Quasi Quarteng announced a series of tax cuts and measures aimed at spurring growth, with the pound falling further 3%.
The pan-European STOXX 600 index dropped 2.3%, taking weekly losses to 4.4% – its worst week since mid-June.
A survey showed the slowdown in business activity in the euro area has deepened this month, possibly entering a recession as consumers rein in spending amid the cost of living crisis.
Europe’s largest economy, Germany, saw its main index fall by 2.0% since November 2020.
“Given the high level of downside risk and uncertainty, everything in the coming quarters is headed for a contraction in economic activity in the eurozone,” said economists at the ODDO BHF, adding that Germany is already in the third quarter. may be in recession.
Europe is heading for a tough winter as doubts about energy supplies paint a bleak outlook for the pick-up in economic activity. Bert Collijn, senior euro area economist at ING, said the European Central Bank’s clear priority for inflation control, another 75 basis point increase in October, is “definitely” on the table.
The STOXX 600 is down 20% for the year. It is also about 20 per cent away from hitting a record high in January.
Interest rates rose sharply during the week, with the Fed raising 75 basis points for the third time in a row, and Switzerland on Thursday exited an era of negative interest rates. The Bank of England increased rates by 50 basis points.
As fears of demand pushed oil prices down 5%, BP, Total Energy and Shell were weighing the most on the STOXX 600, up between 4.9% and 7%. The mining index recorded its worst session in five months due to a fall in metal prices.
All major sectors remained in the red mark. Banks fell 3.6%, with Credit Suisse down 12.4% to hit a record low.
The Swiss bank voices investors for fresh cash, Oura said, approaching them for the fourth time in nearly seven years as it seeks a radical overhaul of its investment bank.
Nevertheless, the banking index in Europe was set to outperform the benchmark STOXX 600 in September on bets of the sector benefiting from a higher interest rate environment.