European shares on Friday gained, marking an upbeat end to the week, helped by an initial boost after the British government’s turnaround on tax cuts, but this faded due to continued uncertainty about its fiscal stance.
The region-wide STOXX 600 index closed up 0.56 percent at 391.31, building on Thursday’s rally, but was still off session highs hit immediately after British Prime Minister Liz Truss announced the scrapping of parts of the government’s fiscal program. It posted a weekly loss of 0.09 percent.
Truss fired British chancellor of the exchequer Kwasi Kwarteng, and said that Britain would retain plans to increase corporation tax.
Kwarteng, whose announcement of unfunded tax cuts had sparked a rout in bond markets last month, has been replaced by former secretary of state for foreign and commonwealth affairs and secretary of state for health and social care Jeremy Hunt.
“It’s been a little bit of a relief trade, but we still have concerns that we don’t know exactly what is happening. We’re going to have to keep an eye out on what the new chancellor says next week,” Capital.com market analyst Daniela Hathorn said.
“Markets need a bit more clarity on what this fiscal plan currently stands at, and they’re going to want to know exactly where we can see the funding come from,” she said.
Photo: EPA-EFE
London’s blue-chip FTSE 100 also came off session highs and ended up 0.12 percent at 6,858.79. It was down 1.89 percent for the week.
The STOXX 600 has fallen 19.8 percent so far this year, with markets on edge about aggressive interest rate hikes from central banks tipping the economy into a recession. An energy crisis exacerbated by Russia’s invasion of Ukraine has also added to worries about an economic slowdown in Europe.
Meanwhile, big US banks reported a hit to profits on Friday as they braced for a weaker economy.
Still, Friday’s gains helped the STOXX index erase some losses from the first three days of the week.
Adding to recent market optimism, Russian President Vladimir Putin on Friday said there was no need for massive new strikes on Ukraine and that Russia was not looking to destroy the country.
Most STOXX 600 sectors were trading higher, led by real estate stocks and utilities.
Among individual stocks, Temenos AG slumped 19 percent after the Swiss banking software group slashed its guidance for the year.
UPM-Kymmene Oyj added 5.7 percent after the Finnish forestry group reported higher third-quarter results and said it expected the year’s earnings before interest and taxes to improve compared with last year.
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