European stocks fell on Friday as a slide in Rio Tinto’s iron ore exports hammered mining majors, while robust earnings from luxury brands were overshadowed by concerns about their sustainability amid surging COVID-19 cases.
The pan-European STOXX 600 index reversed early gains to end lower for a third straight session, down 0.32 percent at 454.74, taking weekly losses to 0.64 percent.
The mining index slumped 2.8 percent as Rio Tinto slipped 3.4 percent after reporting a 12 percent fall in quarterly iron ore shipments ahead of earnings, and dragging other big names such as BHP and Glencore PLC 1.5 percent and 3.5 percent lower respectively.
Concerns about higher inflation and rising COVID-19 infections causing a slowdown in economic recovery have weighed on investors’ minds this week, driving many to the safety of bond markets and making it harder for record-high equities to build on gains.
“On one hand, a strong start to US Q2 earnings season and dovish rhetoric from central banks continued to provide support. [However], several factors have weighed on the outlook, including weaker activity data out of China, signs that growth and earnings have peaked,” said Silvia Dall’Angelo, a senior economist at the international business of Federated Hermes.
Next week, all eyes are likely to be on the European Central Bank meeting, to see if a change in monetary policy is on the cards following its recent strategy update.
Sweden’s Telefonaktiebolaget LM Ericsson lost 9.4 percent, after the telecoms company reported second-quarter core earnings below market estimates, hit by a decline in sales in China.
Luxury stocks tumbled with Burberry down almost 5 percent despite strong sales.
No change to the full-year forecast could signal the improvement cannot be sustained, an analyst said.
Defensive sectors were the gainers, with real estate , utilities and healthcare rising 0.5 percent to 1 percent as worries about COVID-19 remained.
In London, the FTSE 100 ended lower on Friday, as weakness in miners and warnings about a surge in coronavirus infection offset optimism around economic reopening, and the index posted a weekly loss on flagging travel and energy stocks.
After rising as much as 0.6 percent, the blue-chip FTSE 100 index fell 0.06 percent to 7,008.09, with base and precious metal miners down 2.8 percent and 1.8 percent respectively, while banks dropped 1.7 percent.
The British government’s chief medical adviser said that England’s COVID-19 crisis could return again surprisingly quickly and the country is not yet out of the woods, as infections surged ahead of the lifting of legal restrictions.
The FTSE 100 has gained 8.4 percent so far this year on support from cheap interest rates, but higher-than-expected inflation levels, hawkish central bank comments and a jump in local COVID-19 infections have slowed the rise of the blue-chip index.
The index ended the week 1.6 percent lower, its worst week in nearly a month, led by a 5.97 percent weekly drop in travel stocks and 5.14 percent fall in energy stocks.
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