Markets

European shares slide on hawkish Fed signals

Meeting minutes crushed global investor sentiment and sparked a rout in technology stocks

Photograph: iStock

Thu Jan 6 2022 - 10:26

European stocks sank more than 1 per cent on Thursday as hawkish signals from the US Federal Reserve meeting minutes crushed global investor sentiment and sparked a rout in technology stocks.

The pan-European Stoxx 600 index lost 1.2 per cent by 0817 GMT, erasing all of its gains for the year that had sent it to record highs. The Ftse 100 fell 0.7 per cent in morning trade.

On Wednesday, minutes from the Federal Reserve meeting last month showed a tight job market and unrelenting inflation could require the US central bank to raise interest rates sooner than expected and begin reducing its overall asset holdings.

Asian shares took cues from an overnight fall in Wall Street indexes, with the tech-heavy Nasdaq plunging more than 3 per cent.

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All European sectors were in negative territory, with technology and media among the biggest losers in early trading with a more than 2 per cent fall.

Adding to pandemic worries, a French government spokesperson said a “supersonic” rise in Covid-19 infections is set to continue in the coming days and there are no signs of the trend reversing.

In London, banking stocks gained 0.5 per cent as the UK 10-year yields rose, fuelled by rate hike expectations.

"If you're looking for a value play at the moment, UK is quite attractive," said Oliver Blackbourn, portfolio manager at Janus Henderson Investors.

“It tends to do well in these sorts of environments because of factors like its currency which tends to be sort of risk on and also the mix of sectors in the UK market today is really helping.”

The FTSE 100 gained 14.3 per cent in 2021, lagging European and US peers, but Blackbourn said he expects UK stocks to start catching up as markets move toward more value-oriented segments from growth sectors such as technology.

The domestically focussed mid-cap index declined 1.0 per cent, with travel and leisure stocks falling 0.8 per cent.

Britain’s services sector grew in December at the slowest pace since the country was last in lockdown, as the spread of the Omicron variant of the coronavirus hammered hospitality and travel, a survey showed.

Dr Martens slumped 8.8 per cent after bookrunner Goldman Sachs International said Permira Funds sold about 65 million shares of the boot maker.

Food-to-go retailer Greggs fell 1.6 per cent after saying surging cases of Omicron were putting pressure on its store staff, though it was manageable from a business perspective. – Reuters

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