Europe midday: Shares extend losses as rate rises come into focus

The increasing prospect of interest rate rises saw European shares extend losses at midday on Friday after more hawkish remarks from central bankers and a sharper-than-expected fall in UK retail sales last month.

Europe’s pan-regional Stoxx 600 1.15% in early deals with all major bourses in the red.

Global markets turned negative overnight after US Federal Reserve Chairman Jerome Powell said a 50-basis-point rate increase "will be on the table" when the bank meets on May 3-4.

Earlier on Thursday, European Central Bank vice president Luis de Guindos said he supported an end to bond purchases in July.

In the UK, retail sales fell by more than expected in March as surging inflation hit demand for food and petrol, according to official data released on Friday.

Retail sales volumes fell by 1.4% last month compared with February, the Office for National Statistics said, worse than expectations for a 0.3% monthly drop.

Sales of food and petrol, where prices have spiralled in recent months, fell sharply, the ONS said.

“The ONS’ retail sales data is a wake-up call that life is going to be tough for shops – virtual or physical – in the coming months. Once those vastly increased energy bills hit the doormat and households take time to reassess their financial situation, there is every chance that retail sales could get even worse," said AJ Bell investment director Russ Mould.

“Big ticket items look particularly vulnerable, including sofas and airline tickets.

“Pubs will be also watching the trends closely as while beer drinkers may be less willing to trade down to cheaper products, there is still the question of getting them through the door in the first place.

In equity news, shares in French group Kering fell after releasing downbeat sales at its Gucci brand, which was hit by lockdowns in China.

SAP slipped 2.9% after flagging a revenue hit of €300m because of its exit from Russia.

B&M European Value Retail fell 6.4% as CEO Simon Arora, who bought the UK chain in 2004, announced he was retiring next year.

Shares in Swedish hygiene products group Essity soared by 13% despite the company taking a write-down of 1.4bn Swedish crowns on its Russia assets and posting a drop in first-quarter earnings.

HomeServe shares surged by 11.5% after announcing on Thursday it was in talks with Canada’s Brookfield Asset Management for a possible offer for the home repair services firm.