Investing
Chipmakers drag European equities lower ahead of inflation data
Global Banking & Finance Review®
Company
By Devik Jain
(Reuters) -European shares fell on Friday, with semiconductor stocks leading the slide following tepid outlook from U.S. memory-chip firm Micron Technology, while investors awaited euro zone inflation data for clues on the pace of interest rate hikes.
The continent-wide STOXX 600 index slipped 0.3%, a day after marking its worst quarter since the pandemic-led selling of early 2020 and tracking a dour Wall Street session on data that exacerbated concerns around a recession. [.N]
Dutch semiconductor equipment maker ASML, Franco-Italian chipmaker STMicroelectronics and German chipmaker Infineon slid between 0.8% and 3.9% after Micron gave a significantly weaker-than-expected business outlook on Thursday.
Europe’s technology stocks led morning losses with a 1.7% slump, followed by miners and healthcare stocks.
All eyes are now on the first estimate of June consumer price index for the euro zone, due at 0900 GMT, and which will likely show that inflation accelerated to a record high of 8.4% from 8.1% in May.
“The stubborn overshoot of price pressure necessitates a strong response to underpin central bankers’ commitment to their inflation targets and to keep expectations in check,” strategists at Generali Investments wrote in a note.
“That said, we expect a faster growth slowdown and more volatile markets to lead key central banks to terminate their policy normalization closer to neutral rates than markets currently reckon.”
European Central Bank policymaker and fiscal hawk Robert Holzmann would have preferred earlier action on interest rates than the ECB’s current plan to raise them in July for the first time in more than a decade, he said in remarks published on Thursday.
Data showed factory activity in Spain grew last month at the slowest pace since January 2021, while another survey signalled Italy’s manufacturing sector grew at the slowest pace in two years amid a challenging economic environment.
The STOXX 600 lost 1.6% this week and shed more than 16% this year so far, as worries over stubborn inflation to China’s slowing economy and Russia’s invasion of Ukraine curbed risk appetite.
La Francaise des Jeux (FDJ) slid 8% after Citigroup downgraded the French lottery group’s stock to “sell” from “buy”.
Shares of Sodexo gained 5.3% after the French catering and food services group reported upbeat third-quarter revenue, citing strong growth in all business segments and geographies.
(Reporting by Devik Jain in Bengaluru; Editing by Sherry Jacob-Phillips)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
Central banks are national institutions that manage a country's currency, money supply, and interest rates. They oversee monetary policy to ensure economic stability.
Equities represent ownership in a company, typically in the form of stocks. Investors buy equities to gain a share of the company's profits and growth.
The STOXX 600 index is a stock market index that represents 600 companies across 17 European countries, providing a broad measure of European equity performance.
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