European shares end lower but mark first positive week this year

Travel and leisure best weekly performers, up 7.4 per cent

Losses in technology stocks dragged down European shares on Friday after red-hot US inflation drove up bond yields, although a positive earnings season and strong commodity prices helped the Stoxx 600 log its first weekly gain this year. The pan-European index closed 0.6 per cent lower, but added 1.6 per cent this week, its best since late-December. Tech stocks fell 2.2 per cent , the most among their peers on Friday. The sector, along with utilities, was among the worst performers this week, under pressure from elevated debt yields. Bond yields spiked after data showed US inflation jumped in January, while hawkish comments from Fed officials also raised expectations for a sharp rate hike in March.


The Iseq overall index moved marginally downward to 8,509 as investors weighed up the economic outlook and likelihood of interest rate hikes to combat super-hot inflation. AIB and Bank of Ireland traded down 0.9 per cent and 0.8 per cent respectively after adding value in the previous session. The State's largest hotel chain Dalata rose 2 per cent in line with travel-related shares across Europe and the lifting of travel restrictions across the continent. Ryanair, however, fell marginally to €18.19 while Irish Continental Group declined to €4.47. Both stocks traded stronger earlier in the week. Paddy Power Betfair owner Flutter put in another strong performance, rising by 2 per cent to €135. Packaging giant Smurfit Kappa traded down 1.2 per cent.


UK shares fell on Friday, taking cues from global counterparts following a stronger-than-expected US inflation reading, but were set for the biggest weekly gain this year after data showed Britain's economy saw a smaller than expected hit from the Omicron variant. The FTSE 100 slipped 0.4 per cent by early trading, while the mid-cap 250 index fell 0.7 per cent. Both indexes, however, fell the least among European peers on Friday and were set for weekly gains of about 1.5 per cent. On the earnings front, shares of British American Tobacco rose 0.5 per cent after the company posted a 7 per cent rise in full-year adjusted revenue along with a dividend increase and a share repurchase programme worth £2 billion (€2.4 billion) for 2022.


Travel and leisure stocks were the best performers this week, up 7.4 per cent on optimism over easing mask mandates in some US states. Heavyweight mining stocks were also among the top performers, as expectations of improving demand in China drove up commodity prices. Among stocks, carmaker Volvo Cars slipped 4.7 per cent after posting earnings below expectations, pressured by global supply shortages. State-controlled French power company EDF slipped 2.4 per cent after cutting its estimate for its French nuclear output in 2023. Among a few bright spots, Mercedes-Benz Cars and Vans advanced 6.7 per cent after saying it expects an adjusted return on sales of 12.7 per cent in 2021. BMW rose 2.7 per cent after it said it will pay €3.7 billion to take majority control of its Chinese joint venture. French TV group TF1 climbed 1.9 per cent after announcing a 14.2 per cent rise in full-year advertising revenue, citing a robust recovery in advertising spend.


US stock indexes were mixed in choppy trading on Friday as investors digested hot inflation data that spurred a sharp sell-off in the previous session on fears about aggressive interest rate hikes by the Federal Reserve. Seven of the 11 major S&P 500 sectors declined, with technology and consumer discretionary leading the way lower. Megacap growth names Apple, Google-owner Alphabet, Microsoft, Amazon, Meta Platforms, Tesla and Nvidia slipped between 0.2 per cent and 3.5 per cent, dragging the major indexes lower for the second straight session. Energy stocks outperformed with a 1.8 per cent rise, while banks rose 0.9 per cent. "The market is trying to figure out direction and who the new winners are going to be," said Sean O'Hara, president at Pacer ETFs. "For the last several years, it's basically been five stocks that have driven all the returns and some of those names are coming under pressure now." A University of Michigan survey showed US consumer sentiment fell to its lowest level in more than a decade in early February amid expectations that inflation would continue to rise in the near term. – Additional reporting: Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times