European Shares End Nervous Week on a Strong Note

On Friday, there was a 2.6% rise in European stocks, which helped them enter positive territory. The week saw investors moving into riskier assets, as they began to scale back on bets of central bank tightening.

Best Session for Indexes

The STOXX 600 index of European countries recorded its best session in over three months. The last session saw the index hit its lowest level for the year, when investor sentiment had been weighed down by weaker-than-expected business activity in the euro zone.

Until Thursday, the benchmark pan-European stock index had been down for the week, but it surged on Friday to close for the week with a gain of 2.4%, which saw it put an end to a losing streak of three weeks.

Sector Gains

Most broad-based gains for Friday were recorded in technology, banks and healthcare sectors. The retail sector had initially recorded a drop of 3% in the session to reach lows last seen in March 2020. However, it managed to erase these losses and ended 1.9% higher, which saw it record the best day it had seen in the last three months.

Market analysts said that the possibility of an economic recession has increased, which has resulted in dropping commodity prices and a rally in bonds. This has given equity markets a good boost. In recent days, markets have been highly volatile, as investors are concerned that rising inflation and interest rates will result in a sharp drop in economic growth and earnings.

Therefore, this prompted traders to reduce their bets of how far major central banks will go in tightening the monetary policy in this cycle. Analysts said that hopes, stories and fears about inflation and growth have driven markets for half of this year. The only thing certain right now is that the end of the year will also be a volatile one.

Retail And Energy Sectors Suffer

There was a decline in the retail sector, after data highlighted that consumers in Britain had cut back on their shopping last month because of the rapidly rising inflation. Moreover, consumer confidence had also declined to a record low in June. Worries were exacerbated after German fashion retailer Zalando warned that its profits would take a hit. This sent the company’s shares to lows of seven years, but it managed to make up some of its losses.

Italy’s energy services group called Saipem saw a drop of 21.8%, after it said that if its plans of raising capital failed, it would only have financial resources available for a year. There was also a 2.1% and 5.0% rise in GlaxoSmithKline in the UK and Sanofi in France, after data on an experimental vaccine for COVID-19 showed that it is quite effective in protecting against the Omicron variant.

The European Central Bank has announced a rate hike from the next month and the Bank of England has also continued with its hikes, but there is a possibility that the banks may slow down, given that economic activity is on a decline.

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