European shares rose on Friday as bargain-hunters stepped in to buy retailers, banks and oil stocks, after these sectors were hit by heavy selling for much of the third quarter amid concerns about the effect of rising Central Bank interest rates on the economy.
The pan-European Stoxx 600 index closed up 1.3 per cent but briefly pared some session gains after data showed euro zone inflation zooming past forecasts to 10 per cent in September, a new record high. The inflation numbers fuelled expectations of another supersized interest rate hike from the European Central Bank.
The Iseq index rose 2.3 per cent to 6,311.47, with banking stocks among the main gainers. AIB jumped 7 per cent to €2.49, while Bank of Ireland advanced 5.1 per cent to €6.59, as investors chose to focus on the positive effect of rising interest rates on bank’s income lines. Both stocks had been hit in recent days by concerns over the UK economy, where Bank of Ireland has 32 per cent of its loan book and AIB almost 14 per cent.
Construction-related stocks were also in demand, with CRH rising 2.7 per cent to €33.07, while Kingspan added 5.1 per cent to €46.34.
HealthBeacon moved 8.2 per cent higher to €2.64 as the medtech firm reported recorded a rise in revenues for the first half of the year with the company reporting “significant momentum” despite ongoing supply chain challenges.
London’s blue-chips FTSE 100 index edged 0.2 per cent higher thanks to a comeback in hammered bank stocks, which rose 0.6 per cent.
Some hefty declines came in the last week after the UK government unveiled a ‘mini-budget’ which proposed unfunded tax cuts. The subsequent sell-off in gilts forced the Bank of England to step in with emergency bond buying measures to calm the markets, helping the pound off record lows.
After losing more than 10 per cent over the last six sessions, the domestically focused FTSE 250 index surged 2.3 per cent despite a 21.3 per cent plunge in cruise operator Carnival after it forecast a loss for the fourth quarter amid rising costs. Holiday group TUI dropped 10.1 per cent.
Joules Group surged 26 per cent on Friday as the struggling British fashion retailer said that its turnaround plan was making good progress.
Despite the gains seen on the last day of the quarter, the Stoxx 600 index has fallen 4.8 per cent during the July-September period marking its third straight quarterly decline in what will be its longest such losing streak since 2011.
Markets have been roiled since the Russia-Ukraine war earlier this year jolted the region and sent gas prices soaring, leading to rampant inflation, which sparked aggressive rate hikes from central banks and worries about a subsequent growth slowdown.
Italy’s Webuild rose 1.9 per cent after the builder said it expected its commercial results for the year to “significantly exceed” guidance.
Shares of German sportswear makers Puma and Adidas slid 5.7 per cent and 4.1 per cent respectively after US rival, Nike, cautioned about pressure on margins.
The Nasdaq index was ahead in early afternoon trading as Tesla gained on its plans to sharply increase production, even though resilient core inflation added to worries of big interest-rate hikes denting a rise in consumer spending. Shares of the electric-vehicle maker gained after Reuters reported its plans to push global production of its top-selling vehicles in the fourth quarter.
Other growth stocks were also ahead, with Meta Platforms, Alphabet and Amazon gaining ground.
Data showed the core personal consumption expenditures price index jumped 0.6 per cent in August after being unchanged in July. It climbed 4.9 per cent on a year-on-year basis in August after increasing 4.7 per cent in July.
“Inflation is running hotter than expected, so the Fed is going to have to continue to act and probably be more aggressive than they would like to,” said Brian Klimke, director of investment research at Cetera Financial Group.
Shares of Under Armour and footwear retailer Foot Locker dropped as a result of Nike’s downbeat margins outlook. — Additional reporting, Reuters.