European shares rose on Friday, with a boost from defensive sectors after hopes of an economic recovery in major trading partner China were bolstered by more central bank stimulus, although they still ended the week in the red.
China’s central bank cut its five-year loan prime rate by a larger-than-expected 15 basis points (bps), boosting global market sentiment even as COVID-19 cases in Shanghai climbed again.
Travel and tourism stocks, financial services, healthcare and utilities led gains in Europe, rising 1.5 percent to 2 percent, lifting the pan-European STOXX 600 index 0.73 percent to 431.10.
However, the main index was down 0.55 percent over the week.
“It is not surprising perhaps that we have a little bit of a bounce today given the good news from China overnight and as we have had some very negative days this week,” said Jonathan Bell, chief investment officer at Stanhope Capital.
Global stock markets saw another volatile week as recession fears gripped investors after weak Chinese retail sales data and dismal results from big US retailers highlighted the impact of surging inflation.
Over the week, European retail and food and beverage stocks lost 2.2 percent and about 5 percent, respectively, while miners outperformed, rising 4.4 percent.
Data earlier in the day showed British retail sales jumped unexpectedly last month, but the outlook for consumer spending remained resolutely downbeat as the cost-of-living crunch intensifies.
“The unexpected upturn in retail sales could be viewed as a positive sign that the consumer isn’t as bruised as other data suggests, but digging into April’s figures, the big uptick in food and drink spend in supermarkets might indicate that people are choosing their kitchen tables over pubs and restaurants as they look to save money,” AJ Bell financial analyst Danni Hewson said in a note.
The UK’s FTSE 100 index added 1.19 percent to 7,389.98, declining 0.38 percent from a week earlier.
Separate data showed a record rise in German producer prices last month, as the Ukraine war pushed up energy costs.
Eurozone money markets ramped up their bets on a 50 basis point interest rate hike from the European Central Bank (ECB) in July that would bring the bank’s policy rate to zero percent.
“We think these price pressures will continue to build in the coming months,” said Andrew Kenningham, chief Europe economist at Capital Economics.
“That in turn informs our view that the ECB will want to move rapidly to tighten policy. We are forecasting a 25bp rate hike in July, but as we argue here, there is a growing chance that the ECB kicks off with a 50bp hike,” Kenningham said.
Luxury stocks took a hit as Richemont slumped 13.1 percent, as the company struck a cautious note over growth in China after its full-year profit disappointed.
Other luxury brands such as Louis Vuitton owner LVMH, Christian Dior and Hugo Boss lost 1.3 to 2.2 percent.
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