European shares flat on rate-hike jitters; Novo Nordisk jumps

(Reuters) – European shares were range-bound on Tuesday as worries of further interest rate hikes by major central banks in the face of slowing economic growth countered support from healthcare giant Novo Nordisk.

The pan-European STOXX 600 index inched 0.1% higher to 460.42 points. On Monday the index dropped as data pointing to tepid U.S. business activity sparked profit-taking following gains in the prior week.

Defensive healthcare stocks added 0.8%.

Danish drug developer Novo Nordisk rose 3.5%, as trading resumed following a holiday in Copenhagen on Monday. The company said it had started talks to buy a controlling stake in medical device designer Biocorp. The French company’s shares surged 15.7%.

Hawkish comments from European Central Bank (ECB) President Christine Lagarde and Bundesbank President Joachim Nagel on Monday cemented expectations for further rate hikes from the central bank in June.

Dutch central bank chief Klaas Knot said that underlying price pressures in the euro zone may prove more difficult to tame but monetary policy is showing signs of effectiveness and further rate hikes must be done step by step.

These comments come even as the U.S. money markets bet on the Federal Reserve skipping on raising rate this month.

“We are potentially heading towards a more risk-off environment again,” Stuart Cole, head macro economist at Equiti Capital said.

“I can see a scenario where the growth outlook is looking increasingly challenging in both Europe and the U.S. and that suddenly central banks will find themselves facing the dilemma of the need to support growth too.”

The STOXX 600 index has started the month on a lacklustre note as attention shifts toward high-profile central bank meetings next week, including the Fed and the ECB.

Eurozone retail sales data is due later in the day, which will be assessed for the impact of the ECB’s fastest tightening cycle to combat high inflation.

Oil & gas stocks slid 0.8%, tracking falls in crude prices. [O/R]

BKW plunged 9.4% to the bottom of the STOXX 600 after UBS double-downgraded its rating on the Swiss energy firm to “sell” from “buy”.

Idorsia rose 9.5% after it entered into strategic talks with an undisclosed party to sell its businesses in the Asia Pacific region, excluding China, for up to CHF 400 million.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Sherry Jacob-Phillips and Eileen Soreng)