European shares drop as ECB accelerates stimulus exit

Iseq overall index ends session down 1.4% as pan-European Stoxx 600 declines by 1.7%

Shares across the euro zone dropped on Thursday after the European Central Bank surprised markets by accelerating its exit from pandemic-related stimulus, more worried about the effect of Russia's invasion of Ukraine on inflation than the economy.

An index of euro-zone stocks closed down 2.5 per cent, while the pan-European Stoxx 600 index declined by 1.7 per cent.

Dublin

The Iseq overall index ended the session down 1.4 per cent at 6,900.44.

CRH lost 2.6 per cent to €35.76 as investors continued to fret about the building materials giant's exposure to eastern Europe, amid the ongoing war in Ukraine.

Banks were generally also out of sorts, with AIB off 1.2 per cent and Permanent TSB down 3.4 per cent, failing to benefit from a rise in euro-zone bond yields as the ECB said it planned to end asset purchases in the third quarter, earlier than expected.

A rising rates environment is generally seen as good for banks’ lending margins.

“With a geopolitical shock of unknown length and intensity still ongoing, markets have clearly been surprised by the ECB’s decision to start reducing this safety net,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors. “In addition, markets have steepened the expected path of interest rate hikes.”

Still, Irish Continental Group outperformed the market – dipping 0.4 per cent to €3.36, having earlier traded higher – after the Irish Ferries owner reported better-than-expected earnings for 2021 and gave a solid account of current trading, even as fuel prices soared.

London

The FTSE 100 ended the day down 1.3 per cent, at 7,099.09 points. Steel firm Evraz, which is 29 per cent-owned by Roman Abramovich, saw its shares drop 11 per cent before being suspended by the UK financial watchdog due to its links with the Russian oligarch.

It came after the billionaire Chelsea owner was struck by UK government sanctions and his assets were frozen.

National Express slipped 1.2 per cent as it said it was "considering its options" after being jilted by merger partner Stagecoach in favour of a higher rival bid.

Elsewhere, Boohoo shares jumped 19 per cent after the online fashion firm said the growth in net sales over the three months to the end of February had reached 7 per cent, adding to a strong year for the company.

Europe

The German DAX and France's CAC 40 fell almost 3 per cent each, while Italy's MIB lost 4.2 per cent. Auto stocks led losses in Europe, with BMW sliding 5.5 per cent despite more than doubling pre-pandemic earnings in 2021.

A wave of sanctions against Russia, including a US ban on its oil imports, sent crude prices to 2008 highs this week, and equity markets tumbling as investors fretted over soaring inflation. European Union leaders are ready to move ahead with more sanctions if necessary, a draft EU declaration showed.

Among stocks, Carlsberg slipped 5.5 per cent after Danish brewer suspended its forecast due to uncertainty about the large Russian market.

German fashion house Hugo Boss fell 7.1 per cent after announcing a temporary halt to its business in Russia.

New York

Wall Street shares were lower in early afternoon trading on news that US inflation rose to a four-decade high in February, cementing the chances of the Federal Reserve raising interest rate later this month. Monthly consumer prices rose 7.9 per cent in February from a year earlier.

Chipmakers slid, while megacap names Apple and Tesla were also out of sort.

Big banks fell. Goldman Sachs said it was closing operations in Russia, becoming the first major Wall Street bank to exit the country following Moscow's invasion of Ukraine.

Still, shares of Amazon. com jumped after its board approved a 20-for-1 split of the ecommerce giant's common stock and authorised a $10 billion (€9.1 billion) buyback plan. – Additional reporting, Reuters, PA

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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