FRANKFURT: European shares extended their declines on Friday and marked their second consecutive weekly loss, as the escalating conflict in the Middle East and inflation worries dented risk appetite.
The pan-European benchmark STOXX 600 closed 0.5 percent lower. All major regional bourses were in the red, posting marginal weekly falls. Industrial stocks were the biggest drags on the index, down 1.8 percent, with Siemens Energy down 5.7 percent and Rolls-Royce off 5.3 percent.
Miners experienced the biggest percentage loss, down 3.3 percent, as prices of silver tumbled over 3 percent, copper fell over 1 percent and gold prices also ticked lower.
Global markets extended declines this week as the US-Israeli war on Iran approached the two-week mark. US President Donald Trump said the US was going to be hitting Iran “very hard over the next week”, prompting markets to brace for a drawn-out conflict and reassess interest-rate expectations as energy-driven inflation concerns resurfaced.
Pascal Koeppel, chief investment officer at Vontobel SFA Investment Management, said that both Iran and the US had interests in stopping the war. Iran’s interest is in re-opening the Strait of Hormuz, he said, while for the US a priority is reining in mounting defence costs before the midterm elections in November.
Oil prices were about 1 percent higher on Friday, as it became clear that the Strait of Hormuz remained closed.
Energy stocks far outperformed others this week with a gain of nearly 5 percent. Economically sensitive banks fell again, dropping 1.2 percent. Standard Chartered and HSBC, the two global banks most exposed to the war with Iran according to Reuters analysis, extended their monthly declines to over 15 percent each. Data showed harmonised inflation in France rose 1.1 percent year-on-year in February, while the British economy grew by 0.2 percent in the three months to January, below expectations. Among individual moves, BE Semiconductor Industries shares jumped 5.6 percent after the chip-equipment maker fielded takeover interest, Reuters reported. Berkeley Group cautioned that the conflict in the Middle East was weighing on risk sentiment, while reaffirming its annual profit outlook, sending shares of the home builder 1.5 percent lower.
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