Investors fret over impact of war and monetary tightening to fight inflation

Shares across Europe fall heavily as doubts grow over Russia-Ukraine peace talks

European shares retreated after three straight sessions of gains on Wednesday, as investors paused to take stock of the outcome of Russia-Ukraine peace talks. US stocks also fell as optimism around the Ukraine-Russia talks waned and concerns also grew over the prospect of a rapid rise in interest rates hurting economic growth.

DUBLIN

The Iseq was a sea of red by the end of the session as the index finished down 3.5 per cent as almost all of its big hitters slumped.

The banks were among the worst affected as the sector struggled across Europe. AIB was down by 2.7 per cent to €2.07, while Bank of Ireland plunged almost 6 per cent to €5.91.

Worries about US growth, and the risks of a recession there, affected Irish multinationals with US exposure. Building materials giant CRH was down 3.6 per cent to €36.84, while Smurfit Kappa fell almost 4 per cent to €40.48.

LONDON

The FTSE 100 rose, aided by a jump in commodity-linked shares, while doubts about the peace talks weighed on overall sentiment and dragged the midcap index lower. After falling as much as 0.18 per cent, the FTSE closed 0.6 per cent higher, with energy and miners leading gains, while the domestically-focused mid-cap index dropped 1 per cent, snapping its three-day winning streak.

Oil majors BP and Shell gained 3 per cent and 4.6 per cent respectively as oil prices clawed back heavy losses suffered earlier this week. Shell also got a boost after JP Morgan raised its price target.

Further advances were capped by weakness in financials, down 1.3 per cent, with Lloyds Banking Group leading losses after RBC double downgraded the stock to "underperform", saying growth drivers did not appear to be "game-changing".

Pearson fell 5.9 per cent to the bottom of FTSE after the education group said it had rejected a third takeover offer from Apollo, valuing it at £6.7 billion (€6bn).

Harry Potter publisher Bloomsbury had a strong performance after soaring sales of the new novel by fantasy author Sarah Maas helped put it on track for better than expected profits. Shares in the business increased by 35p to 400p.

EUROPE

The pan-European Stoxx 600 lost 0.4 per cent, while commodities-exposed sectors were in the black. European miners and the energy sector rose 2.4 per cent and 3.3 per cent respectively, as prices of oil and metals rebounded.

Germany triggered an emergency plan to manage gas supply, an unprecedented move that could see the government ration power if there is a disruption in supplies from Russia. Frankfurt’s Dax index was the biggest decliner among regional markets, shedding 1.5 per cent to record its worst day in three weeks.

BioNTech advanced 5.6 per cent after saying it has expanded a clinical trial programme to develop new vaccines to tackle the Omicron Covid-19 variant as it reported a profit boost from its first-generation shot.

Shares of Belgian cinema operator Kinepolis Group slipped 4.7 per cent after announcing its finance chief Nicolas De Clercq would step down.

NEW YORK

Eight of the 11 major S&P sectors declined. The S&P 500 energy sector rose 1.1 per cent, set to post its best quarter ever, according to Refinitiv data, as crude prices cut back some of this week’s heavy losses. The utilities sector rose 0.3 per cent, hitting a record high as investors favoured defensive stocks.

The widely tracked US 2-year/10-year Treasury yield curve briefly inverted on Tuesday for the first time since September 2019 as bond investors bet aggressive tightening by the Fed could hurt the US economy over the longer term.

Lululemon Athletica jumped 10.8 per cent after forecasting full-year profit and revenue above estimates as demand for athletic wear remains strong.

(Additional reporting: Reuters/PA)

Mark Paul

Mark Paul

Mark Paul is Business Affairs Correspondent of The Irish Times. He also writes the Caveat column

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