European shares fall on recession fears and Italian political crisis

European shares fell on Thursday amid mounting fears about a global recession as investors bet that the US Federal Reserve will hike rates more aggressively to tackle soaring inflation. Italian stocks slid during the session as the country’s government faced implosion.

The pan-European Stoxx 600 index closed 1.5 per cent lower, adding to a 1 per cent fall on Wednesday when a hot US inflation reading spurred bets that the Fed could go for a bigger hike than the 0.75 percentage point move markets had priced in for this month.

Global equities have taken a hit this year as central banks attempt to tame surging inflation, leaving investors worried about the impact on economic growth. The Stoxx 600 is down about 16 per cent so far this year.

DUBLIN

Banking stocks were out of sorts, with Bank of Ireland down 3.8 per cent at €5.52, while AIB lost 0.7 per cent to €2.05 as investor followers monitored weak earnings reports from US banking giants JP Morgan and Morgan Stanley and the European Commission cut its forecasts for economic growth in the euro zone for this year and next and revised up its estimates for inflation.

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“There is a recessionary fear that continues to be on top of investor minds,” said Bert Colijn, a senior economist covering the euro zone at ING.

But he added that worries also stem from a bigger discrepancy between the European Central Bank and the Fed, with the former seen sticking to a 0.25 percentage point hike next week despite inflation at record highs.

Meanwhile, the euro plunging below parity to a 20-year low against the dollar also spells more trouble for euro zone inflation.

Bucking the trend, Ryanair gained 4.3 per cent to €12.04, while fellow tourism-related player Dalata Hotel Group moved 1.5 per cent higher to €3.37, in line with the wider European travel and leisure sector.

LONDON

UK stocks fell as investors worried about the prospect of a more aggressive stance by major central banks to curb inflation, with a slew of worrying forecasts from companies and weak commodity prices also hurting sentiment.

The blue-chip FTSE 100 slid 1.6 per cent, while the domestically oriented FTSE 120 index declined 1.2 per cent.

Money markets are now pricing close to a 75 per cent likelihood of a 0.5-point rate hike by the Bank of England in next month’s meeting.

Britain’s largest homebuilder Barratt Developments fell 1.5 per cent after it reported fewer home completions than expected for fiscal 2022.

Ashmore Group shed 6.3 per cent after the emerging markets investment firm said assets under management tumbled by $14.3 billion (€14.3 billion) as key global markets buckled under rising geopolitical tensions and inflation spooked investors.

EUROPE

Italy’s MIB index dropped 3.4 per cent to close at its lowest since November 2020 after the Five Star Movement, a coalition member, failed to support a parliamentary confidence vote including measures to offset Italy’s cost-of-living crisis.

Italian bond yields rose sharply, widening spreads with German counterparts.

Oil and gas stocks and miners dipped 3.8 per cent each tracking commodity prices, while banks slipped 3.1 per cent.

Hugo Boss rose 2.4 per cent after the German fashion house raised its 2022 outlook.

NEW YORK

US stock indexes were lower in early afternoon trading after JP Morgan Chase and Morgan Stanley kicked off quarterly earnings on a sour note, while a surge in producer prices fed into concerns about bigger rate increases by the Fed.

In a gloomy start to the earnings season, JP Morgan, the US’s largest bank, reported a worse-than-expected drop in quarterly profit and suspended share buybacks.

Morgan Stanley slipped after it also missed profit estimates as its investment banking unit struggled to cope with a slump in global dealmaking.

US-listed shares of Taiwan Semiconductor Manufacturing rose after the contract chipmaker gave an upbeat revenue forecast.

Conagra Brands fell after the food group forecast annual earnings below estimates, with price hikes slowing demand for its frozen foods and snacks.

— Additional reporting: Reuters