European shares closed flat on Friday, as gains in defensives countered a sell-off in semiconductor and commodity-linked stocks, while investors prepared for the European Central Bank’s (ECB) first interest rate hike in more than a decade this month.
Data on Friday showed eurozone inflation was higher than expected and hit a record high last month. That firmed the case for an ECB rate hike, as the inflation peak could still be months away.
Aggressive central bank moves to curtail inflation have left investors worried about the likely hit to economic growth. The STOXX 600 lost 1.4 percent this week and has shed more than 16 percent this year, as worries from stubborn inflation to China’s slowing economy and Russia’s invasion of Ukraine curbed risk appetite.
“The door is open for [the ECB] to being significantly more aggressive to try and stand down on inflation,” Caxton head of market intelligence Michael Brown said.
The continent-wide STOXX 600 index cut session losses of up to 1 percent, a day after marking its worst quarter since the COVID-19-led selling of early 2020 and tracking a dour Wall Street session. It closed down 0.02 percent at 407.13.
“What we could be seeing [in markets] is a little bit of a dead cat bounce after yesterday’s pretty steep losses rather than a move that’s explicitly tied to that inflation data,” Brown said.
Dutch semiconductor equipment maker ASML, Franco-Italian chipmaker STMicroelectronics and German chipmaker Infineon Technologies AG slid between 2.9 percent and 5.4 percent after US memorychip firm Micron Technology Inc gave a significantly weaker-than-expected business outlook on Thursday.
Europe’s technology index slumped 2 percent. Miners lost 2.5 percent and oil and gas firms also slid, as commodity prices fell on worries about economic growth.
Utilities were the biggest sectoral gainers, up 3.1 percent as Uniper SE recovered after plunging more than 14 percent on Thursday when it asked the German government for help due to losses arising from Russian gas restrictions.
Most major European bourses ended in positive territory.
However, UK stocks came under pressure after data showed factory activity lost more steam last month amid elevated price pressures, underlining the risk of a sharp slowdown or a recession in Britain.
The blue-chip FTSE 100 ended 0.01 percent down at 7,168.65 after flirting with gains and losses in the session, and ended the week 0.56 lower.
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