FRANKFURT: Europe’s STOXX 600slid and logged weekly losses on Friday as concerns over energy-induced inflation pressures due to the US-Iran standoff rattled global markets.
The pan-European benchmark closed down 1.5 percent at 606.92 points, snapping two straight days of gains. Germany’s DAX declined the most among regional bourses, down 2.1 percent on Friday.
Positive corporate earnings and a rally in semiconductor shares aided gains this week, but were overshadowed by cost-of-living worries as energy prices stay elevated.
Europe’s materials index led declines, dropping 5.1 percent tracking weaker metal prices, while the defence sector fell 3.6 percent, the worst weekly performance among individual sectors.
Semiconductor firms paused their recent rally, with ASML, and Aixtron down 4.4 percent and 6 percent, respectively.
US President Donald Trump finished his two-day meeting with China’s President Xi Jinping, which yielded little headway with regard to reopening the Strait of Hormuz. Trump also said his patience with Iran was running out.
“Energy prices are pretty much the biggest problem facing Europe and ultimately, there doesn’t appear to be any political will to address that and markets are pricing that,” said Michael Hewson, senior market analyst at iForex.
Inflation data out of several European countries and the US this week showed that the jump in energy costs have started reflecting in consumer and producer prices, prompting investors to price in at least two rate hikes by the end of the year by the European Central Bank. Reflecting this, bond markets also witnessed a selloff.
“Markets which are more reliant on foreign energy imports and manufacturing heavy, which is energy intensive, feel the pain a bit more,” said Daniel von Ahlen, senior macro strategist at GlobalData TS Lombard.
Economically sensitive cyclical sectors also came under pressure, with banks dropping 6 percent as BNP Paribas and Deutsche Bank lost 3 percent and 2.6 percent, respectively.
Meanwhile political uncertainty was rife in the UK as Prime Minister Keir Starmer struggled to hold on to power after his main rival signalled a challenge to his leadership. The blue-chip FTSE 100 ended down 1.7 percent, while the more domestically-focused mid-cap index lost 1 percent.
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