European Markets Close Lower On Rising Bond Yields, Inflation Concerns

European stocks ended lower on Friday, weighed down by rising U.S. bond yields and concerns over inflation.

The markets were also weighed down by U.S. Federal Reserve Chairman Jerome Powell’s comments on Thursday that reopening of the economy will likely create some upward pressure on prices and that the central bank will be “patient” for now with regard to policy action even there is a transitory increase in inflation.

Investors were also reacting to the latest batch of economic data from Europe and the U.S., and digesting some earnings news. Among the major markets, the U.K. fared relatively better thanks to Joe Biden’s administration agreeing to suspend tariffs on a range of goods coming from the UK. The move aims to resolve the trans-Atlantic trade dispute over aerospace subsidies.

The pan European Stoxx 600 ended down 0.78%. The U.K.’s FTSE 100 declined 0.31%, Germany’s DAX slid 0.97%, France’s CAC 40 shed 0.82% and Switzerland’s SMI ended 1.32% down. Despite today’s losses, the CAC 40, DAX and the FTSE 100 gained 1.5%, 1% and 2.5%, respectively this week.

Among other markets in Europe, Belgium, Denmark, Finalnd, Iceland, Ireland, Netherlands, Poland, Spain, Sweden and Ukraine ended weak.

Czech Republic, Greece, Norway, Portugal, Russia and Turkey closed higher, while Austria ended flat.

In the UK market, Scottish Mortgage, IAG, Melrose Industries, Rolls-Royce Holdings, Pershing Square Holdings, JD Sports Fashion, IHG, Whitbread, Admiral Group and Fresnillo ended lower by 3 to 6.5%.

On the other hand, BT Group, Standard Chartered, Sainsbury J, Pennon Group, Barclays, HSBC Holdings, Tesco and United Utilities gained 2 to 5%. BP, Royal Dutch Shell, Morrison Supermarkets, Coca-Cola and GlaxoSmithKline also ended notably higher.

In Germany, MTU Aero Engines ended more than 6% down. Lufthansa shed about 5%, while Adidas, Merck, Deutsche Post, Vonovia and Munich RE lost 2 to 3%.

Volkswagen, Deutsche Bank, RWE, Thyssenkrupp and Beiersdorf posted strong gains.

In the French market, Air France-KLM slid more than 6%. Airbus Group shares ended nearly 5% down. Thales, STMicroElectronics, Vinci, Sodexo, Safran, LVMH and Hermes International also declined sharply, while Veolia, Total, Danone and Credit Agricon closed on the positive side.

In economic news, data from Destatis showed factory orders in Germany expanded 1.4% month-on-month in January, reversing a revised 2.2% fall in the previous month. Orders were forecast to climb 0.7%.

France’s trade deficit widened to EUR 3.94 billion from EUR 3.57 billion in December, data from the customs office showed. In the same period last year, the shortfall was EUR 5.23 billion. Exports grew 2.8% on month and imports climbed 3.5% in January from the previous month. On a yearly basis, exports and imports decreased 4.8% and 6.%, respectively.

U.K. house prices dropped for the second straight month in February, data released by the Lloyds Bank subsidiary Halifax and IHS Markit showed. House prices fell 0.1% sequentially, slower than the 0.4% decline seen in January.

The current national lockdown continued to weigh on hiring decisions in February, the latest KPMG and REC Report on Jobs revealed Friday. Permanent job placements fell for the second consecutive month, albeit at a softer pace than in January. At the same time, growth in temp billings eased to a seven-month low.

In news from the U.S., a report from the Labor Department sid non-farm payroll employment jumped by 379,000 jobs in February after climbing by an upwardly revised 166,000 jobs in January. Economists had expected employment to increase by 182,000 jobs compared to the uptick of 49,000 jobs originally reported for the previous month.

The unemployment rate unexpectedly edged down to 6.2% in February from 6.3 percent in January. Economists had expected the unemployment rate to remain unchanged.