On Friday, European stocks moved higher, but were on course for sharp losses in the week, as hike in interest rates by a number of global banks fueled concerns about an economic slowdown globally.
Stocks Rise, But Overall Decline
There was a 0.8% increase in the European STOXX 600 index due to volatile trading, but it was still down by 4% in the week, which could be the worst one it has had since the start of May. Likewise, the global stock markets were also on course for their biggest decline in a week since March 2020, when there had been a meltdown because of the coronavirus pandemic.
The markets were dealing with pressure brought on by worries of a recession, after the interest rate hikes by the US Federal Reserve and the Bank of England were followed by a surprise move by the Swiss National Bank for taming inflation. According to analysts, the financial markets have been hit with a sinking feeling this week due to the rate hikes by global central banks and they will not be able to sustain the relief for long.
It is not likely that the worry about troubling economic times ahead will abate anytime soon. Later in the day, the data for inflation in the euro zone is also due and it is likely to have some impact as well. So far, there has already been a 17% decline recorded by the STOXX 600 index because of worries about a gloomy economic outlook. Likewise, rise in prices and aggressive monetary policy tightening by banks have also taken its toll on corporate earnings.
A number of regional markets are quite near, or have already declined 20% from their recent peaks, which is usually defined as a bear market.
Multiple Sectors Suffer
This week, the sectors that suffered the worst hits in Europe included oil and gas, retail stocks as well as technology. In a weekly note, Bank of America said that since January 2020, there had been no outflows from stocks for every $100 inflows. This indicates that equities are in for more pain. There have been outflows recorded in Europe in the last 18 weeks.
As far as individual stocks are concerned, there was a 0.7% drop in Tesco, the biggest retailer in Britain, after it announced that it inflationary pressures had resulted in hints of changes in consumer behavior. There was a 0.5% gain in Santander, after the Spanish lender replace long-time chief executive Jose Antonio Alvarez and appointed Hector Grisi in his place.
There was also a 3.4% gain recorded in trader and miner listed in London, Glencore. This happened after the company forecast that its operating profit for the trading division, adjusted for the half-year, would be higher than $3.2 billion. This is certainly at the top of their range. The markets closed steady for now, but with volatility expected to continue, things remain uncertain and the possibility of a recession also goes up.
