European shares deepen losses after hawkish Fed comments

A slide in European bank and energy stocks was exacerbated by hawkish comments from a Federal Reserve official, which also saw the Stoxx 600 index snap a four-week winning streak as fears of US policy tightening came to the fore.

DUBLIN

The European banking sector plunged nearly 3 per cent and Irish lenders got caught up in the sell-off. Bank of Ireland tumbled 7 per cent to €4.66, with the sale of a €350 million portfolio of non-performing loans not helping sentiment. Rival AIB was down 6.1 per cent to €2.28.

Hotels group Dalata was another big faller as internal industry figures showed that Dublin city centre hotels are facing a tough summer, with average occupancy levels of only about 13 per cent forecast for the height of the season based on current bookings. It closed down 5.4 per cent to €4.16.

Iseq heavyweight CRH was down nearly 2 per cent to €41.53, while Smurfit Kappa and Ryanair fell 2 per cent and 1 per cent respectively.

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Food-related stocks weathered the storm relatively well. Total Produce gained 3.4 per cent to €2.73, with Origin up 3.2 per cent to €3.53. Kerry, which announced the sale of its consumer foods' meats and meals business late on Thursday, was flat at €106.60.

LONDON

London’s FTSE 100 index marked its worst session in over a month on Friday, dragged by weakness in financial and commodities-linked stocks, while data showed retail sales fell in May as people dined out more following a lifting of pandemic restrictions.

The blue-chip FTSE 100 ended 2 per cent down and shed 1.7 per cent this week, snapping a win streak of three consecutive weeks in gains. Banking and life insurance stocks, down 2.7 per cent and 2.5 per cent respectively, were among the top drags.

Oil majors BP and Royal Dutch Shell fell 2.7 per cent and 3.1 per cent respectively, tracking weaker crude.

Britain's biggest retailer Tesco also reported a sharp slowdown in underlying UK sales growth in its first quarter, sending its shares down 4.1 per cent.

The domestically focused mid-cap index fell 1 per cent dragged by retailers, industrials and financial stocks. Among individual stocks, Kin and Carta rose 6.6 per cent after Dutch insurer Aegon disclosed a 5.24 per cent stake in the digital transformation services company.

EUROPE

The pan-European Stoxx 600 index ended 1.6 per cent lower in its worst day in five weeks, with bank and energy stocks leading declines. The index also dropped 1.2 per cent this week.

Sentiment was also dented by the European Union losing its bid for speedier Covid-19 vaccination deliveries from drugmaker AstraZeneca, which could slow the pace of a steady vaccination campaign.

The banking sector, which typically does well when interest rates are high, plunged nearly 3 per cent as concerns over an eventual reduction in liquidity saw investors locking in recent gains.

Germany’s Dax index fell 1.8 per cent as data showed a bigger-than-expected jump in May producer prices.

Danish pharmaceutical company Orphazyme sank 44 per cent after saying it had failed to win support from the US Food and Drug Administration for its arimoclomol drug, a treatment designed for genetic disorder Niemann-Pick disease type C.

NEW YORK

The Dow fell 1 per cent on Friday after Federal Reserve official James Bullard said inflation was stronger than anticipated and it would take the central bank several meetings to figure out how to pare back stimulus.

The blue-chip Dow and the benchmark S&P 500 were set for their worst day in a month after Mr Bullard, president of the St Louis Federal Reserve, said he was among the seven officials who saw rate increases beginning next year to contain inflation.

Rate-sensitive bank stocks shed 1.8 per cent as US yield curve flattened.

Transportation finance and logistics company CAI International surged 46.5 per cent after it agreed to a $1.1 billion takeover by Mitsubishi HC Capital. – Additional reporting: Reuters