Iseq slides as European shares are rattled by mounting concerns over rate hike

Dublin’s Iseq index stood out as a weak spot on Thursday as European stocks got September off to a weak start amid mounting concerns about economic growth, aggressive interest rate hikes and record-high inflation.

The pan-European Stoxx 600 fell 1.8 per cent as all sectors traded lower, with the index clocking its fifth straight day in the red. The Iseq overall index fell more sharply, sliding 2.7 per cent to 6,786.74.

Euro zone manufacturing activity shrank for a second month in August, according to a survey that showed weak demand meant factories were unable to sell as much as they made and built up stocks of finished goods at a record pace.

That followed data on Wednesday showing inflation in the bloc hit another record high last month.

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Money markets priced in a roughly 80 per chance for a 0.75 of a percentage point rate hike by the European Central Bank when it meets next week, up from a just over a 50 per cent chance before Wednesday’s data.

DUBLIN

Banking stocks were among the main decliners, with Bank of Ireland off 2.5 per cent at €6.01, while AIB lost 1.2 per cent to €2.24, amid fears about what rising rates will do for credit demand and quality.

Dalata Hotel Group was also out of sorts, falling 3.7 per cent to €3.37, as the stock failed to secure support in the past two sessions from a robust set of interim results.

Flutter Entertainment lost 5.2 per cent to €111.80, while Kerry Group traded down 3.5 per cent at €99.24.

LONDON

The UK’s mid-cap index on Thursday marked its longest losing streak since the height of pandemic-induced selloff in 2020 as a weak sterling and spiralling inflation fed into fears of a deep recession in the UK.

The FTSE 250 index, more exposed to the domestic economy, shed 3 per cent to hit its lowest since mid-July. The index closed down for a ninth consecutive session. The exporter-heavy FTSE 100 closed down 1.9 per cent, also hitting mid-July lows, as the economic slowdown fears gripped global equity markets.

Liz Truss, the frontrunner to replace Boris Johnson as UK prime minister, said she would act immediately to help people cope with surging energy prices that threaten to leave many unable to heat their homes this winter.

Global miners such as Glencore and Rio Tinto dropped 6.6 per cent and 3.4 per cent respectively, as metal prices slumped on worries about weak demand.

Reckitt Benckiser fell 5.2 per cent after the consumer goods maker announced the departure of its chief executive Laxman Narasimhan.

EUROPE

Germany’s Lufthansa fell 3.1 per cent after a pilots’ trade union announced a 24-hour strike for Friday as the two parties failed to reach an agreement on wages.

Data showed German retail sales rose unexpectedly in July, up 1.9 per cent on the month as online retail and the food sector showed recovery. Analysts had predicted sales would stagnate. The reading came as a rare bright spot as soaring gas prices following Russia’s invasion of Ukraine have had a knock-on effect on costs of goods and services.

NEW YORK

US stock indexes were lower in early afternoon trading as fresh signs of a tight labour market raised expectations of aggressive rate hikes by the Federal Reserve, lifting bond yields and pressuring growth stocks.

The weekly jobless claims fell more than expected last week and layoffs dropped in August, consistent with strong demand for workers. Investors now await the monthly non-farm payrolls report on Friday for more evidence on the labour market.

Technology and growth stocks were out of favour, with Apple, Amazon, Tesla and Microsoft all down.

Chipmakers lost ground, led by Nvidia and Advanced Micro Devices, after the US imposed an export ban on some top AI chips to China.

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