European stocks on Friday closed lower, ending three weeks of gains as investors booked profits in technology and commodity-linked shares due to concerns over rising inflation and interest rates on the back of a jump in bond yields.
The benchmark STOXX 600 fell 1.64 percent to 404.99 and shed 2.38 percent for the week — its first weekly loss this month — with technology stocks losing the most as they continued to retreat from 20-year highs.
On the day, resource stocks were the softest-performing European sectors, tumbling 4.2 percent from a near 10-year high in their worst session in five months.
“Equity markets across the US and Europe are quite expensive now, and with bond yields constantly rising, the fixed income market is proving to be more attractive than the riskier equity market,” Societe Generale SA strategist Roland Kaloyan said. “Investors are actually looking at the pace at which yields drop and the current speed is quite concerning for equity markets.”
US and eurozone bond yields retreated slightly, but stayed close to highs hit this week as investors positioned for higher inflation this year. Yields were also set for large monthly gains.
BETTER RETURNS
Sectors such as utilities, healthcare and other staples — usually seen as proxies for government debt due to their similar yields — lagged their European peers for the month as investors sought better returns from actual debt.
Still, the STOXX 600 has gained this month, helped by a rotation into energy, banking and mining stocks on expectations of a pickup in business activity following COVID-19 vaccine rollouts.
Travel and leisure was the strongest sector this month as investors bet on an economic reopening boom. Banks also outperformed their peers thanks to higher bond yields.
Better-than-expected fourth-quarter earnings have also reinforced optimism about a quicker corporate rebound this year.
Of the 194 companies in the STOXX 600 that have reported quarterly earnings so far, 68 percent have beaten analysts’ estimates, according to Refinitiv.
In London, the export-heavy FTSE 100 marked its weakest session since late October last year, snapping three straight weeks of gains.
MINING STOCKS DOWN
The FTSE 100 slipped 2.53 percent to 6,483.43, declining 2.12 percent from a week earlier.
Mining stocks, including Rio Tinto Group, Anglo American PLC and BHP, were the biggest drags on the index, while oil heavyweights BP PLC and Royal Dutch Shell fell, tracking a decline in oil and metal prices.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
RSS