Europe midday: Investors fret over policy moves, Omicron, inflation
European shares extended losses on Friday, as investors digested policy decisions by major central banks and the rapidly spreading Omicron coronavirus variant.
The benchmark regional Stoxx 600 was down 0.74% after a surge on Thursday with only the UK FTSE 100 index outperforming other European bourses as British retail sales improved.
Figures released earlier by the Office for National Statistics showed retail sales unexpectedly jumped in November, boosted by strong demand for clothing and a bumper Black Friday.
Retail sales volumes rose by 1.4% in November, following growth of 1.1% in October, which was revised up from 0.8%. The November increase was above consensus, with most analysts looking for growth closer to 0.8%.
Year-on-year sales growth strengthened to 4.7%, compared to a 1.5% decline in October, also above consensus, for 4.2%.
On Thursday the European Central Bank only slightly reined in monetary policy support, while the Bank of England increased interest rates and the US Federal Reserve signalled plans to tighten rates in 2022. Overnight the Bank of Japan signalled a slowing of asset purchases but extended support for small businesses.
“Central banks are slowly and at different speeds beginning to dial back their emergency pandemic-era support. This ought to create a bit more forex volatility in the coming months as it plays out and as central banks either do more tightening than they are currently signalling, or a lot less. It’s all about the rate of change of expectations in expectations for policy moves,” said Neil Wilson at Markets.com.
“The Bank of England confounded just about everyone by raising rates. It’s incredibly hard to see how the inflation outlook has deteriorated so much since November, whilst omicron raises near-term uncertainty about the path of the economy.”
“Never mind that a 15bps hike to 0.25% is hardly going to tame inflation that will hit 6% – the thinking is one of proving their price stability bona fides more than anything else. We’ll see what the new year brings, but the policy-making looks a bit chaotic.”
In equity news, Airbus shares gained as the planemaker completed a third contract win in 36 hours at the expense of rival Boeing with a deal to supply 100 narrow-body jets to Air France-KLM subsidiaries.
Johnson Matthey shares were higher after the company said it had sold its health business to Altaris Capital Partners for £325m.
Italian diagnostics firm DiaSorin slumped more than 12% after it forecast weaker 2022 sales as Covid-19 revenues plunged nearly 60%.
HSBC shares were lower after the UK Financial Conduct Authority fined the bank £64m for anti-money laundering failings.