European shares slumped 1.5 per cent on Thursday, stretching declines to the second straight session, as dismal results from big US retailers underlined the hit from surging inflation on the world’s biggest economy. Tracking US peers, European retailers fell nearly 2 per cent and were the biggest drags on the pan-European Stoxx 600 index, which had slid 1 per cent on Wednesday. Losses were broad based, with all major sub-sectors trading in the red.
With global business sentiment on the wane in the face of Russia's invasion of Ukraine and higher living costs generally, most of the big players on the Dublin market took a hit. CRH, Ryanair, Kerry Group and Kingspan all fell between 1 and 3 per cent. Despite the prospect of higher interest rates across Europe from July, AIB fell 1.7 per cent to €2.23. Rival Bank of Ireland rose marginally. "A rate hike by the ECB at the July meeting is very likely . . . This will lift euro zone money market rates, which will rise, due to monetary policy, for the first time since April 2011," said Luca Cazzulani, head of strategy research at UniCredit.
Elsewhere on the Irish market insurer FBD rose 1.5 per cent to €9.30 while Paddy Power Betfair owner Flutter was also down 1.9 per cent at €104.35.
Nestlé, Tesco, Diageo and Unilever fell between 4.5 per cent and 5.5 per cent on Thursday. Among other stocks, HomeServe rallied 10.2 per cent after Canada's Brookfield Asset Management said it had agreed to buy the British home repair services firm for £4.08 billion. France's Valneva surged 16.9 per cent after the European Union's medicine regulator accepted the company's filing of a marketing authorisation application for its inactivated Covid-19 vaccine candidate.
The Stoxx 600 is down 12 per cent for the year as China’s Covid-19 worries added to global recession fears. But as cases drop, hopes of recovery have offered some respite to investors.
UK's FTSE 100 tumbled on Thursday as investors globally fretted over the broadening impact of inflation on economic growth and corporate profits, while Royal Mail slumped after reporting disappointing results. The export-oriented FTSE 100 dropped 1.8 per cent, joining a rout in global markets, with the stronger pound weighing on consumer companies.
Unilever, Diageo, Reckitt Benckiser and British American Tobacco were down between 1.7 per cent and 5.3 per cent, while supermarket chain Tesco dropped nearly 4.1 per cent. Royal Mail was fell 12.4 per cent to its lowest level since December 2020 after its full-year profit came in slightly below market expectations and the postal company warned of margin pressures in the United States.
The S&P 500 and the Dow extended losses on Thursday as Cisco Systems slumped after it gave a dismal outlook, while investors fretted over the impact of surging inflation on economic growth and corporate earnings. Shares of the networking gear maker slumped 12.7 per cent as it lowered 2022 revenue growth outlook, taking a hit from Russia exit as well as component shortage due to China lockdowns.
Kohl’s slipped 1.1 per cent after the department store chain cut its full-year profit forecast, the latest US retailer to flag a hit from four-decades high inflation. The S&P consumer staples index fell 1.9 per cent to hit a seven-month low and was the biggest decliner among the 11 major sectors as retail firms face the brunt of rising prices hurting the purchasing power of US consumers. – Additional reporting: Reuters