Investing
European stocks eye weekly gains as defensives, tech shine
Global Banking & Finance Review®
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By Sruthi Shankar
(Reuters) -European stocks rose on Friday, led by defensive and technology names, as investors pivoted to safer bets amid growing worries that tighter monetary policies and surging inflation will cause a global recession.
The pan-European STOXX 600 index rose 1.1% after hitting a fresh 2022 low in the previous session when weaker-than-expected euro zone business activity data weighed on sentiment.
Still, the benchmark was on track to post small weekly gains, boosted by technology, personal & household goods and healthcare sectors.
Trading has remained volatile in recent days as investors fear that rising interest rates and soaring inflation will sharply slow earnings and economic growth, sending commodity prices and government bond yields tumbling this week.
“Talks of a recession have gone up significantly and dented commodity prices and caused bonds to rally. That’s certainly helped equity markets,” said Roger Jones, head of equities at asset manager London & Capital.
“Cyclical stocks have started to selloff in-line with PMIs and defensive stocks have held up pretty well.”
The Ifo Institute’s survey showed German business morale fell more than expected in June, as rising energy prices and the threat of gas shortages unsettled businesses in Europe’s largest economy.
Earlier, data showed British consumers cut back on shopping in May in the face of fast-rising inflation, and a measure of their confidence sank to a record low this month.
Europe’s retail index fell 1.3% to its lowest since March 2020 in the wake of German online fashion retailer Zalando’s profit warning.
Zalando slumped 11.8% after it lowered its 2022 profit outlook, citing deteriorating macro conditions and consumer confidence.
Italy’s Saipem dropped 10.4% after the energy services group said it would have financial resources available for less than one year if its plans to raise capital did not go through.
France’s Sanofi and UK’s GlaxoSmithKline rose 1.9% and 1.7% after a late-stage data on an experimental COVID-19 vaccine from the drugmakers showed the shot confers protection against the Omicron variant of the vaccine.
(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, manufacturing, and retail sales.
The STOXX 600 index is a stock market index that represents the performance of 600 large, mid, and small-cap companies across 17 European countries, serving as a benchmark for European equities.
Defensive stocks are shares in companies that provide consistent dividends and stable earnings regardless of the state of the overall stock market, often found in sectors like utilities and consumer goods.
A profit warning is an announcement made by a company to inform investors that its earnings will fall below expectations, often leading to a decline in the company's stock price.
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