PARIS: European shares dipped on Friday at the end of a central bank policy-packed week that reinforced views that interest rates could stay higher for longer, while shares of Siemens Energy plunged as it withdrew its annual profit outlook.
The STOXX 600 index closed 0.3% lower after data showed euro zone business growth stalled this month as the downturn in manufacturing deepened. The index has lost 2.9% for the week, posting its worst weekly performance in over three months, as investors digested more interest rate hikes from major central banks including the Bank of England, Norges Bank and Swiss National Bank, and the spectre of elevated inflation for longer.
Investors also worried about the impact of protracted tightening cycles on global economic recovery, with concerns of a recession in the UK heightening after the BoE’s larger-than-expected 50-basis-point rate hike.
“A hike was fully expected, but the magnitude of the rise surprised most,” said RBC Brewin Dolphin’s head of asset allocation, Paul Danis.
“It’s quite possible that by the time the Bank is finished hiking this cycle, the base rate ends up exceeding the 2007 peak of 5.75%.” Germany’s DAX index shed 1.0%, leading losses among regional peers as shares of Siemens Energy sank 37.3%. The company, which supplies equipment and services to the power sector, warned that the impact of quality problems at its Siemens Gamesa wind turbine unit would be felt for years.
The basic resources index fell for the seventh straight session, posting weekly declines of 7.9%. It was the worst performer for the week.
GSK Plc rose 4.9% after it reached a confidential settlement of a US litigation over claims that the British drugmaker’s heartburn drug Zantac caused cancer.
Ocado fell 5.3% in the absence of any bid developments after soaring the day before on a news report of possible takeover interest in the online supermarket and technology group.
DATA DIGEST While euro zone business growth stalled in June, a separate reading showed German business activity slowed notably this month. French business activity contracted this month for the first time in five months, data showed.
“There are several headwinds, including elevated uncertainty, a drag from US recession, the lag effects of ECB tightening cycle, and a less supportive fiscal stance,” said Clemente De Lucia, senior European economist at Deutsche Bank Research.
“Until mid-2024, we expect quarterly growth rates of zero or small positives at best. This will leave the economy vulnerable to further contractions or recession.”
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