European shares hit two-month lows on Monday, led by sectors including travel and leisure and technology as a mix of worries over prolonged Covid-19 curbs in China and surging bond yields fuelled selling pressure.
The pan-European Stoxx 600 index shed 2.9 per cent to touch its lowest since March 8th, with travel and leisure stocks falling 6 per cent.
Tech stocks dropped 5 per cent to November 2020 lows as US and European government bond yields surged to multi-year highs on bets for faster interest rate hikes aimed at taming a surge in inflation.
Hawkish policymaker Robert Holzmann said over the weekend the European Central Bank should hike interest rates as many as three times this year to combat inflation.
With inflation expected to weigh heavy on real income and discretional spending, Paddy Power Betfair owner Flutter took the biggest hit on Dublin's Iseq index, dropping 6.4 per cent to €93.02.
The Irish gambling giant admitted last week that offline trade has been slow to recover from Covid restrictions. With the outlook for travel also tilted towards the downside, both Ryanair and hotel chain Dalata also took knocks, falling by 1.8 per cent and 3 per cent respectively.
Food giant Kerry fell by 5 per cent to €95.22 despite opening a new €38 million "taste facility" in KwaZulu-Natal, South Africa, to produce sustainable food for the continent.
AIB and Bank of Ireland fell by 1.3 and 2 per cent.
UK shares ended lower on Monday as tightening lockdowns in China added to investors’ concerns about a recession amid the Bank of England’s dour economic outlook last week.
The commodity-heavy FTSE 100 index fell 2.3 per cent to record its lowest closing since March 16th, with miners and oil majors Shell, BP leading losses as commodity prices retreated on demand concerns. Industrial metal miners including Rio Tinto, Glencore and Anglo American fell about 4 per cent each.
"The biggest concern that markets have at the moment about UK is that we're likely to see fewer rate hikes over the course of the next 12-18 months and much slower growth, but I don't think we're going to be unique in that," said Michael Hewson, chief market analyst at CMC Markets, UK.
Investors were already rattled after the British central bank sent a stark warning on Thursday that Britain risks a double-whammy of a recession and inflation above 10 per cent.
Capital & Counties Properties and Shaftesbury slid 6.9 per cent and 2.9 per cent, respectively after the real estate firms said they were in advanced talks on a merger that would bring such London tourist destinations as Covent Garden and Soho under one umbrella.
The pan-European Stoxx 600 index was down 15.6 per cent since hitting an all-time high in January. Investors also awaited inflation readings from the United States in the week, with Wall Street's S&P 500 index and Dow Jones hitting fresh 2022 lows on Monday.
Adding to the gloom, investor morale in the euro zone fell in May to its lowest level since June 2020 as the impact of the war in Ukraine on Europe's largest economy becomes increasingly clear. Of the nearly 60 per cent of European companies that have reported results so far, 72 per cent have topped analysts' profit estimates, as per Refintiv IBES data.In a typical quarter, 52 per cent beat estimates.
Dutch postal firm PostNL slumped 12.9 per cent after it cut its full-year forecast. BBVA gained 0.7 per cent after Deutsche Bank upgraded the stock to "buy".
US stocks slid on Monday as higher US Treasury yields hit growth stocks amid prospects of aggressive monetary policy tightening, with investor sentiment taking a hit from fears of a sharp economic slowdown in China. All of the 11 major S&P sectors fell in early trading.
The energy sector tumbled 3.4 per cent as oil prices fell more than 2 per cent, sparked by weak China data and a tighter Covid-19 lockdown in Shanghai that deepened fears that the global economy is headed for a slowdown.
The tech-heavy Nasdaq dropped 3.4 per cent, while the benchmark S&P 500 index hit its lowest level in a year as megacap stocks Microsoft, Amazon, Apple, Google-owner Alphabet, Meta Platforms and Tesla fell between 2.3 per cent and 3.2 per cent. – Additional reporting by Reuters