LONDON: Banks and luxury stocks led declines on Friday, pushing European shares into the red for the week that saw hawkish signals from a flurry of major central banks and rising worries about the economic impact of the Omicron coronavirus variant. The pan-European STOXX 600 index fell 0.6% after rallying on Thursday, when the European Central Bank reined in stimulus slightly but promised to support the economy.
The Bank of England unexpectedly hiked rates on Thursday, a day after the US Federal Reserve signalled plans to tighten rates in 2022. As markets still digest the ECB decision, banks fell, with euro zone bond yields also on the decline.
The STOXX 600 lost 0.3% on the week and is now more than 3% away from record highs scaled in November. “Macro concerns might be playing a part but a lot of investors have been edging towards the door for some days now, and the lack of any lasting bounce in stocks this week has meant that more are looking for ways to book gains ahead of the two volume-light weeks,” said Chris Beauchamp, Chief Market Analyst at IG.
Underscoring recent hawkish moves by central banks, data showed euro zone inflation surged to its highest rate on record in November. Germany’s blue-chip DAX dropped 0.7% after a survey showed business morale declined for a sixth month as Europe’s largest economy feels the effects of supply bottlenecks and COVID-19 restrictions.
European countries prepared to impose further restrictions on travel and more on Friday. But travel stocks surged 2.3% on Friday with airlines in the lead. HSBC expects the scientific consensus on Omicron to emerge soon, making travel restrictions more predictable and uniform across countries which it said should allow for recovery in the European airline sector.
London’s FTSE outperformed, rising 0.1% as miners and retailers rallied, while a slide in luxury stocks saw France’s CAC 40 drop 1.1% Auto stocks dropped 2.7% after European industry data showed the number of new vehicles registered dropped 17.5% in November on the heels of a global semiconductor shortage and supply snags.
Airbus gained 1.7% after completing its third big win in 36 hours at the expense of Boeing with an Air France-KLM deal. Italian diagnostics firm DiaSorin slumped almost 10% after it forecast weaker 2022 sales as COVID-19 revenues plunged nearly 60%.