European equities ended flat on Friday as a jump in major financial stocks,driven by surging bond yields, offset weakness in high dividend-yielding sectors and commodity companies reeling from a slide in oil and metal prices.
The pan-European Stoxx 600 index closed 0.1 per cent higher but that brought its October gain to 4.6 per cent, its best month in seven and recouping all of September’s losses as strong-third quarter earnings reports drew in investors.
Ryanair was the index's main mover, rising 3. 6 per cent to €16.95, as recovery in Europe's Covid-battered aviation sector gathered momentum. Cairn Homes rose 1 per cent to €1.12 as new figures show housing starts over the past 12 months has risen to more than 30,500 – the highest annual figure since July 2008.
AIB and Bank of Ireland rose by 0.5 per cent and 0.8 per cent respectively as markets price in two European Central Bank rate hikes by December 2022.
Packaging group Smurfit Kappa was one of the few big names to lose ground, shedding 0.7 per cent to close at €45.29 as investors fretted that the company could struggle to pass on raw material price increases to customers. Hotel group Dalata was also down 3.6 per cent while Paddy Power Betfair owner Flutter fell 1.2 per cent to €163.60.
UK shares tracked global markets lower on Friday, with anxiety over potential interest rate hikes and a slide in state-backed bank NatWest – owner of Ireland's Ulster Bank – dragging the blue-chip FTSE 100 index south.
NatWest fell 4.5 per cent even though its profit trebled in the third quarter, as its margin contracted in a sign of how rock-bottom central bank rates have squeezed the income it can make from lending.
"It was well overdue for a pullback and today's numbers have given investors the perfect reason. Profits were still lower than Q2 and net interest margin hasn't improved," said Michael Hewson, chief markets analyst at CMC markets.
Investors are expecting the Bank of England to raise its record-low interest rates as early as next week for the first time since the start of the pandemic.
The FTSE 100 index ended 0.2 per cent lower, weighed by weakness in energy stocks, down 1.2 per cent. Oil majors BP and Royal Dutch Shell were among the biggest decliners on the back of weaker crude prices.
Premium German carmaker Daimler added to its share value after posting a higher quarterly profit, despite a 30 per cent drop in Mercedes-Benz sales due to the chip crisis. Luxury eyewear brand EssilorLuxottica also advanced 1-2 per cent after raising its 2021 guidance and saying sales continued to rise above pre-pandemic levels in the third quarter.
French aerospace group Safran was another to advance after it raised its full-year cashflow target, while reinsurer Swiss Re added 3.4 per cent after reporting strong net profit results as it recovers from the pandemic.
Meanwhile, data showed the French and Italian economies growing faster than expected in the third quarter, while supply shortages held back German output. "We're going to keep seeing this two-way price action in the markets, driven by a clash between strong earnings and optimism over the economic outlook, contrasting with risks of higher inflation, interest rates and energy prices," said Oanda analyst Craig Erlam.
US stocks climbed from intraday lows as traders weighed disappointing earnings and bond-market gyrations sparked by concerns over inflation and monetary tightening. The dollar strengthened the most in a month.
The S&P 500 and Nasdaq 100 had retreated with Amazon and Apple slumping after reporting underwhelming results on Thursday. The Dow Jones Industrial Average turned positive, led higher by Microsoft and Visa.
"Front and centre are the results from Apple and Amazon yesterday missing expectations, but more importantly the commentary about the supply chains," said Cliff Hodge, chief investment officer at Cornerstone Wealth Group.
Yields on shorter-maturity treasuries rose more than long-dated issues. Inflation pressures and the prospect of interest-rate hikes are whipsawing bond markets. The dollar ticked up from a one-month low and crude oil fluctuated. – Additional reporting: Reuters/Bloomberg