European shares dropped on Wednesday, snapping a three-day rally, as investors tempered expectations of central banks toning down their hawkish stance on inflation with declining business activity in the region fuelling fears of an economic downturn.
Employment data from the US did little to allay jitters about rate hikes. US private employers stepped up hiring in September, while the Institute for Supply Management’s services industry employment gauge also shot up, suggesting strong labour demand.
The Iseq fell 2.2 per cent, losing ground after a 5.5 per cent gain in the previous trading session, as many of its key stocks slipped. Packaging company Smurfit Kappa fell 5.1 per cent to €29.40, while Bank of Ireland declined 2.4 per cent to €7.15 and building materials giant CRH ended 1.5 per cent lower at €34.58. Kingspan, which had climbed more than 5 per cent on Tuesday, erased those gains in Wednesday’s session, declining 6.75 per cent to €47.67.
Ryanair finished in positive territory, nudging up 0.2 per cent to €11.08, while AIB also advanced 0.45 per cent to €2.70.
The export-oriented FTSE 100 ended 0.5 per cent lower, while the more domestically-oriented FTSE 250 closed 1.5 per cent down. Weighing the most on the FTSE 100 was the financial sector, which slipped 1.5 per cent, while precious metal miners dropped 2.2 per cent.
Data for September showed Britain’s private-sector economy suffered the sharpest contraction in activity since a Covid lockdown early last year, underlining the challenge facing prime minister Liz Truss.
Tesco fell 4.1 per cent after Britain’s biggest retailer forecast full-year profit at the lower end of its previous estimate. Rival Ocado’s shares slumped 10 per cent, while the wider retailer sector dipped 3.6 per cent on the news, which fanned worries of a worsening cost-of-living crisis.
Shares of Hill & Smith rose 4.4 per cent after the infrastructure products maker bought US-based construction equipment manufacturer National Signal.
After rallying more than 5 per cent in the previous three sessions, the pan-European STOXX 600 index was down 1 per cent as a sharp rate hike from New Zealand’s central bank on Wednesday jolted investors and weighed on risk sentiment.
The index had logged its best one-day performance since mid-March on Tuesday after weaker US manufacturing data, shrinking US job openings and a smaller-than-expected rate hike from the Reserve Bank of Australia spurred hopes that central banks globally could shift to less-aggressive rate hikes in future.
In Frankfurt, the Dax slipped 1.2 per cent, while in Paris the Cac 40 slid 0.9 per cent as the latest data showed euro zone business activity contracted for a third month in September, dashing any hopes the currency union will avoid recession.
Nearly all STOXX 600′s sectoral indexes fell, led by real estate stocks and retailers. Telecom stocks and banks fell 2.2 per cent and 2.1 per cent respectively. Among individual stocks, shares of Bachem Holding gained 2.2 per cent as the biotech supplier floated plans to build a third site in Switzerland.
Wall Street fell in the first half of trading as a two-day rally in US stocks was cut short by rising Treasury yields after data showed firm demand in labour market despite rising interest rates.
Rate-sensitive technology and related stocks like Nvidia, Amazon, Apple and Alphabet fell between 1.3 per cent and 2.8 per cent.
Energy stocks were the sole gainer, up 1.5 per cent after OPEC+ agreed its deepest cuts to oil production since the 2020 Covid pandemic, curbing supply in an already tight market.
Twitter lost momentum in line with its peers, a day after surging 22 per cent after billionaire Elon Musk decided to proceed with his original $44-billion bid to take the social media company private. , the electric-car maker headed by Musk, slid 6.1 per cent.
Additional reporting: Reuters