UK recession and interest rate anxieties pull markets down

Nagging recession and interest rate worries saw European equities slide for the second day in a row on Thursday despite earlier reports that the European Central Bank (ECB) could move to slow the pace of rate hikes.

The pound tumbled on UK chancellor Jeremy Hunt’s austerity budget as Britain attempts to move past former chancellor Kwasi Kwarteng’s disastrous September mini budget.

Dublin

The Iseq index gave up three-quarters of 1 per cent on Thursday as investors weighed Jeremy Hunt’s economic statement and fresh economic projections suggesting the British economy is already in recession. Britain is “now in recession” Mr Hunt told MPs during his economic statement speech, scrapping previous forecasts that suggested some modest growth could be expected in 2023.

Shares in companies with significant exposure to British consumers tumbled during the session, with Ryanair down more than 2 per cent to close the session at €12.51 per share.

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Shares in boxmaker Smurfit Kappa, which traders said had been on “a decent run of late”, slipped 2.6 per cent to €34.30.

After what market sources described as a “very positive” capital markets day in the United States on Wednesday, Paddy Power owner Flutter gave back some of its recent gains, falling half a per cent to finish the day at €128.35.

Meanwhile, shares in hotel operator Dalata added 1.4 per cent to €3.20 per share amid an ongoing shortage of hotel rooms in Ireland, exacerbated by the Ukrainian humanitarian crisis. Sandwich maker Glanbia added 1 per cent to €11.32, while shares in Bank of Ireland and Permanent TSB gained 0.3 per cent and 0.9 per cent respectively.

London

The benchmark FTSE 100 index was 0.7 per cent lower at 7301.8, while gilts edged up slightly in a sign of investor concerns over the UK’s economic prospects.

Consumer-facing brands took a hit after Jeremy Hunt unveiled revised projections for the UK economy.

Shares in retail and delivery tech company Ocado shed 8.6 per cent of their value following Mr Hunt’s speech. High-street fashion giant Next gave up close to 0.6 per cent, while airlines also suffered, with Aer Lingus parent International Airlines Group sliding 1.16 per cent and EasyJet falling 0.5 per cent.

Shares in Britain’s major banks received a boost after the government confirmed it will slash its tax surcharge on the sector to 3 per cent from 8 per cent. Lloyds Banking Group and NatWest saw shares rise by about 1.5 per cent, lifting them towards the top of the FTSE 100, after the treasury confirmed the tax on banks’ profits would be cut from April.

Europe

The pan-European Stoxx 600 index slipped by roughly half a per cent on Thursday despite early optimism in Europe about the earnings of industrial giant Siemens, which helped pull the German Dax index up almost a quarter of a per cent.

Shares in the company climbed almost 6.7 per cent after it raised its dividend, reported significantly higher profit and revenue in its fourth quarter, and said it expected strong growth in earnings and sales in its next fiscal year.

But early reports that the ECB might slow its rate hikes soon led to more selling were followed by renewed talk from Fed officials that US rates are not high enough. The blue-chip European Stoxx 600 lost close to 0.2 per cent, led lower by banks including Italian Intensa Sanpaolo, down 0.6 per cent and Spain’s Santander, down 1.7 per cent.

Dutch conglomerate Philips was the single biggest loser of the session. The company’s share price shed nearly 2.8 per cent of its value after reports in the US that one of its subsidiaries knew of issues with its breathing machines long before notifying customers of potential health risks.

New York

US stocks slumped after St Louis Fed president James Bullard became the latest policymaker to flag that interest rate rises had further to rise. Rates might need to rise to a 5-7 per cent range, Mr Bullard said on Thursday while warning of further financial stress ahead.

By closing bell in Dublin, the S&P 500 had fallen 1 per cent while the tech-heavy Nasdaq fell 0.7 per cent.

Earnings beats from tech and consumer-facing companies did little to help sentiment. Nvidia, down 0.6 per cent, posted quarterly sales that topped analysts’ estimates, while Cisco Systems, up 4 per cent, gave a bullish revenue forecast. Macy’s, meanwhile, climbed more than 13 per cent as it succeeded in bringing in shoppers despite a trend away from discretionary purchases as inflation persists.

Shares of megacap tech and other growth companies including Apple, Amazon and Alphabet were down between 0.9 per cent and 3 per cent. – Additional reporting: Bloomberg, PA and Reuters