European shares fall as oil surge hits travel companies

European shares fell on Wednesday as concerns about rising oil prices hit travel-related stocks, with Ryanair and ferries operator Irish Continental Group among the hardest hit in Dublin.

The pan-European Stoxx 600 index declined by 1 per cent to return almost all of the gains made in the previous session.

Brent crude hit $83.47 (€72.30)a barrel, its highest since October 2018, in mid-afternoon trading in Europe, although it ended the session lower to take a breather from a strong surge in recent months.

Dutch and British wholesale gas prices hit record highs on Tuesday amid wider energy market price rises.

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"The euro area is one of the biggest losers (from the spike in natural gas prices) in the developed world, with a current account deterioration potentially approaching 2 per cent of [gross domestic product]," Deutsche Bank analysts said in a note. "Recent moves could potentially wipe out Europe's trade surplus if they persist."

DUBLIN

The Iseq overall index declined by 1.1 per cent to 8,378.51. Irish Continental Group lost 3.6 per cent, and Ryanair pulled back 3.7 per cent as investors monitored gyrations on the oil market.

Banking stocks were also out of sorts, with AIB off 1.7 per cent at €2.43 and Bank of Ireland down 0.3 per cent at €5.10.

Hibernia Reit fell by 0.7 per cent to €1.19, failing to glean much support from news that it had completed the sale of One and Two Dockland Central in Dublin to Commerz Real for its open-ended real estate fund haus Invest for €152.3 million.

LONDON

London's blue-chip FTSE 100 dipped 1.2 per cent, pressured by fears of higher inflation, while supermarket retailer Tesco topped the index on raising its annual outlook and strong first-half results.

A recent survey found that more UK manufacturers plan to raise their prices than at any other point in the past three decades as cost pressures continue to build.

Inflation fears rising on the back of soaring energy costs, supply side and labour shortages have weighed on equities, as central banks look to pull back their pandemic-era monetary support and hike rates to relieve cost pressures.

Still, banking stocks gained 1 per cent amid growing expectations that the Bank of England will increase interest rates to combat inflation. Banks’ lending margins stand to gain in an environment of rising official rates.

HSBC led the pack after UBS raised its price target and upgraded the stock to "buy" from "neutral".

Tesco rose 5.9 per cent after raising its full-year outlook following strong profit in the first-half results.

Global recruitment firm PageGroup climbed 8.3 per cent after it raised its profit forecast.

Tobacco group Imperial Brands fell 3.5 per cent, although it said it was on track to meet its full-year operating profit forecast.

EUROPE

Germany’s DAX dropped 1.5 per cent after data showed German industrial orders fell more than expected in August on weaker demand from abroad following two months of unusually strong gains.

With the third-quarter earnings season looming, analysts are anticipating a near 46 per cent rise in profit for companies on the Stoxx 600, boosted by energy and industrial companies, according to Refinitiv IBES data.

German software firm TeamViewer sank 25 per cent after it reported quarterly results below its own expectations and cut full-year guidance.

Deutsche Telekom fell 5.4 per cent after Goldman Sachs sold shares worth €1.58 billion.

NEW YORK

US shares were also in negative territory in mid-afternoon trading after a strong showing of private jobs in September fuelled bets that the Federal Reserve could start reining in its monetary stimulus soon, while worries lingered about the government debt ceiling.

A gridlock in Congress about the debt limit showed no sign of abating, as Senate Democrats planned a third attempt to get Republicans to vote to raise the federal government's borrowing authority and head off a catastrophic default.

American Airlines Group fell after Goldman Sachs cut its rating on the carrier to "sell" from "neutral".

Shares in steelmaker Nucor Corp dropped after the same Wall Street investment bank lowered its rating to "neutral" from "buy". – Additional reporting, Reuters