Energy and tech stocks drag markets lower as rate-hike worries resurface

European shares retreated further on Friday from one-year highs touched earlier in the week as energy and technology stocks spearheaded losses on mounting concerns that the Federal Reserve would stick to its monetary-tightening trajectory for longer.

The pan-European Stoxx 600 index closed down 0.2 per cent, after having touched its highest level in a year in the previous session on a boost from French blue-chip shares. Recent data from the United States, including a hotter-than-expected January producer prices report, have added to a growing pile of evidence that the Federal Reserve’s aggressive rate hikes have not yet cooled the economy to the central bank’s satisfaction.

DUBLIN

Insulation maker Kingspan jumped nearly 6 per cent after full-year results showed the company grew its revenue and trading profit last year despite “bumpy” economic conditions. The group’s revenue increased by 28 per cent from €6.5 billion to €8.3 billion, while profit increased by 10 per cent to €833.2 million, up from €754.8 million the year before.

The more subdued economic outlook saw both AIB and Bank of Ireland lose ground. They fell by 1.4 per cent and 0.4 per cent respectively. After completing a deal to buy Ulster Bank’s “Business Direct” loan book, Permanent TSB traded up by 0.8 per cent.

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[ Taming inflation will take ‘significant period’, Fed Reserve chair warns ]

Concern about interest rates and lower oil prices pulled Ryanair in different directions but left the airline’s share price unchanged at €15.05.

LONDON

Britain’s FTSE 100 ended lower on Friday, with energy stocks leading losses as oil prices fell on concerns about interest rates staying higher for longer, while lender NatWest dropped on a dour earnings forecast.

The blue-chip FTSE 100 lost 0.1 per cent, but posted a weekly gain of 1.5 per cent. The index retreated from a record high hit in the previous session but stayed above 8,000 points.

“Investors are reappraising their expectations for interest rates in the light of very strong data in the US and some quite hawkish comments from central banks,” said Paul O’Connor, head of multi asset at Janus Henderson Investors.

Heavyweight stocks such as BP and Shell dragged the energy sector down 1.7 per cent, after oil prices fell on concerns that more US interest rate hikes could weigh on demand, as well as signs of ample supply.

Meanwhile, shares of NatWest tumbled 6.9 per cent to the bottom of the index, after the British bank warned that rising interest rates may not deliver the long-lasting earnings bonanza investors hope for.

EUROPE

Energy firms fell 1.9 per cent to spearhead declines on the Stoxx 600 as crude prices dropped on concerns of more US rate hikes weighing on demand. Rate-sensitive technology shares followed suit with declines of 1.7 per cent.

Limiting losses on the Stoxx 600, were shares of ‘defensive’ firms, with the healthcare, utilities and telecom subindices rising between 0.6 per cent and 0.8 per cent.

[ ECB board member warns of risk to economic growth if rates are raised too high ]

France’s CAC 40 index fell 0.3 per cent, but hovered near record-high levels hit in the previous session while Germany’s Dax index shed 0.3 per cent. German producer prices rose more than expected in January, though the rate of increase eased for the fourth month in a row, data showed on Friday.

Still, the broader Stoxx 600 logged weekly gains of 1.4 per cent on a boost from upbeat earnings, improving euro zone economic outlook, with certain consumer discretionary stocks, including big luxury names benefiting from the reopening in China.

Mercedes-Benz Group rose 2.8 per cent, after beating analysts’ estimates for quarterly earnings, though the premium car maker warned of lower earnings this year amid economic uncertainty. Shares of Sika gained 4.9 per cent after the Swiss chemicals company’s 2023 guidance beat analysts’ expectations.

NEW YORK

US stock indices fell, weighed down by energy and megacap growth names, as investors worried that inflation and signs of strength in the US economy could put the Federal Reserve on course for more interest rate hikes.

Seven of the 11 major S&P sectors were lower, with energy stocks sliding 3.6 per cent as oil prices tumbled almost 3 per cent. Rate-sensitive megacap names like Microsoft, Apple and Amazon lost more than 1 per cent as the yield on 10-year treasury notes hit a three-month high.

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Moderna fell 5 per cent after its experimental messenger RNA-based influenza vaccine delivered mixed results in a study.

Deere & Co surged 7.6 per cent after the world’s largest farm equipment maker raised its annual profit and beat quarterly earnings expectations. – Additional reporting by Reuters