A volatile week as investors assess the prospects for a recession

LONDON – European markets closed sharply higher on Friday, ending a volatile week, as investors around the world assessed inflation and fears of a recession.

The European Stoxx 600 Index closed up temporarily 2.6%, its best day in more than three months, with technology shares adding 3.8% to lead the gains as all sectors ended in positive territory.

In terms of individual stock price movement, London-listed British defense company Ultra Electronics jumped more than 12% after the British government went ahead with the process of signing off on its rival Cobham’s takeover of the company.

At the bottom of the pan-European benchmark, Finnish petroleum refining and marketing company Neste slipped more than 7%.

Central banks last week took strong steps to rein in inflation, and investors are now hoping to control high consumer prices as commodity prices – particularly oil and economic output – have fallen sharply in recent days. Energy and food were the main drivers of inflation worldwide.

However, this tightening course of aggressive policy has raised fears of a recession, which US Federal Reserve Chairman Jerome Powell told Congress on Wednesday as a “possibility” as he emphasized that the central bank was “strongly committed” to lowering inflation.

Weaker-than-expected euro zone business data on Thursday compounded fears that the bloc could head into a recession, and pushed European stocks to a new low in 2022.

Stocks in the Asia-Pacific region closed higher overnight, while stocks in the US rose on Friday as Wall Street looked to post a rare positive week amid a difficult first half of the year.

On the data front in Europe, UK retail sales fell 0.5% month-on-month in May, just below the -0.7% economists had expected in a Reuters poll, while the monthly rise in sales in April was revised down sharply from 1.4%. to 0.4%.

New data released by research firm GfK on Friday revealed that consumer confidence in the UK has fallen to its lowest level since records began, as the country faces a 40-year high inflation rate, slowing growth and a deepening cost-of-living crisis for families.

The Ifo Institute Business Climate Index for Germany fell to 92.3 in June from 93.0 in May, while business conditions and expectations also declined slightly.

Final data on Friday showed that the Spanish economy expanded 0.2% in the first quarter of 2022, slowing from a 2.2% growth rate in the fourth quarter of 2021.

British Prime Minister Boris Johnson suffered a double whammy overnight as his ruling Conservative Party lost two major by-elections to the main opposition Labor Party and the Liberal Democrats.

Defeats in two diametrically opposed circles in England – seen as a test of Johnson’s standing after the “party gateway” scandal and amid a cost-of-living crisis – led to the immediate resignation of Conservative Party chief Oliver Dowden.

Subscription to CNBC PRO For exclusive insights, analytics, and live action day programming from around the world.

Leave a Comment