European shares ended a choppy session slightly higher on Friday, but were down on the week as investors worried about the fallout from the Russia-Ukraine war, while a rally in the commodities sector kept a lid on declines.
The pan-European STOXX 600 added 0.1 percent, with losses for banks and some defensive stocks offsetting gains in energy, basic materials and technology names.
“Some late weakness has seen equities fall back, but overall, the rally in equities is still going,” said Chris Beauchamp, chief market analyst at online trading platform IG. “Nervousness remains, but equities have moved through the week without giving back too much ground.”
END OF RUN
After two weeks of gains that saw it rise more than 7 percent, the STOXX 600 lost 0.2 percent this week, as lofty energy and commodity prices from sanctions on Russia fanned inflation fears and stoked worries about an economic growth slowdown.
The US would work to supply liquefied natural gas to the EU this year to help it wean off Russian energy supplies, Western leaders said, as Russia said payment in rubles for natural gas exports was just days away, exacerbating supply shortage worries.
Germany said it has made significant progress toward reducing its exposure to imports of Russian gas, oil and coal.
Europe’s basic materials sector is up 20 percent so far this year and the energy index is 15 percent higher.
The Ukraine war is likely to reduce prospects for global growth in the coming year, US Secretary of the Treasury Janet Yellen said on Friday.
German business morale deteriorated this month due to worsening supply chain issues resulting from high gasoline prices, but the country is not facing a recession in the first quarter due to the Ukraine war, the Ifo institute said on Friday.
SUPPLY SHOCK
“Equities are seen as a relatively good hedge in case of inflation, but the type of inflation that we’re currently seeing is a supply shock, which is unlike the demand destruction caused by COVID-19,” Rabobank NV senior market economist Elwin de Groot said. “In a broad sense, you can question whether companies can sail through this without any damage.”
Telecom Italia SpA rose 1.8 percent as sources said CVC Capital Partners and rival private equity investors are looking at a potential investment in the services arm of the company.
Generali SpA firmed 1.9 percent, lifted by a new plan for the insurer that targets higher growth.
Sweden’s Trelleborg AB jumped 23.2 percent after Yokohama Rubber Co agreed to buy Trelleborg Wheel Systems for ¥265.2 billion (US$2.18 billion).
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