European shares suffer worst quarter since onset of pandemic

Banks out of sorts across the day in Dublin

European shares fell on Thursday, capping off their worst quarterly performance since the pandemic-led selling of early 2020, as investors became increasingly wary of a global recession given hawkish central bank actions to try to tame inflation.

The pan-European Stoxx 600 index closed 1.6 per cent lower, bringing its total decline for the second quarter of the year to 10.7 per cent.

DUBLIN

The Iseq index lost 0.9 per cent on Thursday, with banks out of sorts as investors looked beyond the expected earnings benefit from imminent European Central Bank rate rises to combat inflation, and fretted instead about the outlook for the European economy.

AIB lost 5.2 per cent to €2.17, while Bank of Ireland traded 2.9 per cent lower at €6.03.

Oil stocks were also in focus, with Providence Resources rising 6 per cent to 3.5 cent, as the market digested news that businessman Larry Goodman had hiked his stake in the oil and gas explorer to over 16 per cent.

Tullow Oil lost 6.3 per cent to 53 cent, amid growing disquiet among certain shareholders in the company’s planned merger partner Capricorn Energy about the merits of the deal. A dip in oil prices on Thursday didn’t help sentiment.

LONDON

London’s Ftse 100 fell 2 per cent as concerns grew that prolonged inflationary pressures would force central banks to act aggressively, leading to a global economic downturn.

Still, its exposure to commodity-linked firms and global companies helped it to outperform its global peers this year.

“The Ftse 100 has very little to do with the UK economy itself, so the local recession is less impactful,” said Azad Zangana­, a senior European economist and strategist at Schroders.

“But if we were to see a global recession, we would eventually see a hit to demand for commodities, so that area could potentially suffer.”

Britain’s economy grew by an expected 0.8 per cent in the first quarter, but risks shrinking in the second quarter due to a hit to demand as inflation jumped to a 40-year high of 9.1 per cent.

Miner Anglo American and retailer B&M European Value Retail fell more than 5 per cent to lead losses on the Ftse 100.

Heavyweight oil companies BP and Shell slipped 2.4 per cent and 2.3 per cent, respectively, while industrial metal and mining stocks also dropped.

HSBC Holdings, Lloyds and NatWest Group fell after Barclays cut its price targets for the stocks.

Bunzl gained 1.8 per cent after the business supplies distributor said it expected higher annual revenue, benefiting from red-hot inflation and acquisitions in the last year.

EUROPE

The Stoxx 600 has shed more than 16 per cent this year so far, as worries from soaring inflation to China’s slowing economy and Russia’s invasion of Ukraine curb risk appetite.

Among single stocks, Uniper SE tumbled 14.4 per cent after the German utility withdrew its outlook for the 2022 financial year due to gas supply restrictions from Gazprom.

Shares of its Finnish parent Fortum dropped 6.1 per cent.

Electrode maker Industrie De Nora slipped 4.4 per cent on its debut on Italy’s main market.

BioNTech rose 5.6 per cent after the German drugmaker along with Pfizer signed a $3.2 billion (€3.1 billion) deal with the US government for the delivery of 105 million doses of their Covid-19 vaccine.

NEW YORK

US stocks were lower in early afternoon trading, setting the Dow Jones Industrial Average up for its worst first six months since 1962, on concerns that a dogged pursuit by central banks to tame inflation would hamper global economic growth.

Federal Reserve chair Jerome Powell on Wednesday vowed not to let the US economy slip into a “higher inflation regime”, even if it means raising interest rates to levels that put growth at risk.

Large-cap growth stocks including Microsoft, Apple, Amazon and Tesla fell.

Walgreens Boots Alliance declined as the pharmacy chain maintained its full-year earnings forecast due to declining Covid vaccinations.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times