European Stocks Close Lower On Inflation, Rate Hike Concerns

European stocks closed on a weak note on Friday amid concerns the Federal Reserve will be more aggressive in hiking interest rates to combat inflation.

Markets also reacted to comments from Federal Reserve Bank of St. Louis President James Bullard who said that he supports raising interest rates by a full percentage point by July 1.

The pan European Stoxx 600 declined 0.59%. The U.K.’s FTSE 100 edged down 0.15%, Germany’s DAX declined 0.42% and France’s CAC 40 shed 1.27%, while Switzerland’s SMI slid 0.66%. The FTSE 100 gained about 1.9% in the week, while CAC 40 and DAX added 0.9% and 2%.

Among other markets in Austria, Belgium, Czech Republic, Denmark, Finland, Poland, Portugal, Russia, Spain and Sweden ended with sharp to moderate losses.

Ireland and Netherlands edged down marginally, while Greece, Iceland, Norway and Turkey closed higher.

In the UK market, Spirax-Sarco Engineering, Experian, Segro, Ashtead Group, Halma, Aveva Group, Prudential, Bunzl, Ocado Group and IAG declined 2 to 4%.

Hikma Pharmaceuticals, Intertek Group, Smurfit Kappa Group, Scottish Mortgage and Dechra Pharmaceuticals also declined sharply.

British American Tobacco gained nearly 3% after it reported a 7% rise in full-year adjusted revenue.

Unilever, Evraz, Flutter Entertainment, Airtel Africa, B&M European Value Retail, Antofagasta, BP, Imperial Brands, Kingfisher and Lloyds Banking Group gained 1 to 3%.

In the German market, Zalando declined 4%, Continental, Sartorius, Linde and Adidas shed 2.7 to 3%, and Fresenius Medical Care, Infineon Technologies, Puma, Siemens, Merck and HelloFresh ended lower by 2 to 2.3%.

Daimler rallied nearly 7%. BMW and Porsche Automobil rallied 2.7% and 2.5%, respectively. Henkel, Deutsche Telekom, RWE and Volkswagen also ended notably higher.

In the French market, Unibail Rodamco, Essilor, Hermes International, Michelin, ArcelorMittal, Schneider Electric, Publicis Groupe and LVMH ended lower by 3 to 4.2%.

Air Liquide, Dassault Systemes, Air France-KLM, BNP Paribas, Societe Generale, STMicroElectronics, Faurecia and Renault also declined sharply.

WorldLine climbed more than 5.5%. Atos gained about 4.3%, while Technip and Sanofi both gained about 1.1%.

In economic news, a report from the Office for National Statistics showed the UK economy expanded at a steady pace in the fourth quarter, with gross domestic product growing 1% sequentially, the same pace of expansion as seen in the third quarter. Economists had forecast a quarterly growth of 1.1%.

Still the level of quarterly GDP in the fourth quarter was 0.4% below its pre-coronavirus level.

On a yearly basis, GDP grew 6.5%, slightly faster than the 6.4% expansion expected by economists. GDP expanded by an estimated 7.5% in 2021, following a 9.4% fall in 2020.

Germany’s wholesale prices continued to increase sharply in January, rising 16.2% year-on-year, after a 16.1% rise in December, data from Destatis showed. In November, prices grew 16.6%.

On a monthly basis, wholesale prices rose 2.3% in January, following a 0.2% gain in the previous month.

Data from the Federal Statistical Office showed Swiss consumer price inflation increased in January. Consumer prices rose 1.6% in January, following a 1.5% increase each in December and November. Economists had forecast inflation to remain unchanged at 1.5%.

On a monthly basis, consumer prices grew 0.2% in January, after a 0.1% fall in the previous month.

The core CPI increased 0.8% annually in January and declined 0.2% from a month ago, the data showed.