European equities failed to hold onto earlier gains and edged lower on Friday, putting them on track for their eight straight day of losses — the longest losing streak since November 2016.
(Bloomberg) — European equities failed to hold onto earlier gains and edged lower on Friday, putting them on track for their eight straight day of losses — the longest losing streak since November 2016.
The Stoxx 600 Index was 0.6% lower as of 10:40 a.m. in London, with construction and chemical stocks among the worst performers. Higher interest rates threaten to tip Europe into 1970s-style stagflation, with the economy sinking into a downturn and inflation running above 5%.
“It’s starting to look like a real reversal,” said Alexandre Hezez, chief investment officer at Group Richelieu, a Paris-based asset manager. “The risk of stagflation is coming back very strongly in Europe. The market is afraid of the negative jaw effect between significant inflation and the risk of recession.”
What’s more, technicals are also flashing amber. The euro-area benchmark Euro Stoxx 50 also closed below its 200-day moving average on Thursday for the first time since early 2022 and is testing a major support level around 4200, in place since May.
The main regional benchmark is poised to drop for the first time in three weeks, as this year’s rally in European equities falters. Investors are tracking slowing growth and sticky inflation in the region, with central banks expected to hold rates higher for longer. The focus next week will turn to the European Central Bank’s meeting and US inflation data.
Among individual stock moves, Computacenter Plc shares jumped after the IT reseller reported first-half results that beat market expectations, while D’Ieteren gained after the Belgian automobile distributor raised its forecast for adjusted pretax profit for the full year.
Read more: ECB’s Hike-or-Pause Dilemma Going Down to Wire, Poll Shows
“The ECB is already in its pre-meeting blackout period, and the Fed will follow this weekend. The data calendar is light today which may leave markets with more room to contemplate the busy week ahead with a US inflation theme and the chance for another, possibly final ECB hike,” said Benjamin Schroeder, senior rates strategist at ING Bank NV.
European equities experienced a 26th week of outflows with $66 million leaving funds focused on the region, according to a Bank of America note citing EPFR Global data.
For more on equity markets:
- Equities’ Fate Still Interlocked With Rates Path: Taking Stock
- M&A Watch Europe: Orange, Repsol, Stroeer, Eni
- Smurfit Deal New Setback for Struggling London Market: ECM Watch
- US Stock Futures Unchanged; Smith & Wesson Brands Gains
- LSE Investors Sell Another £2 Billion Stake: The London Rush
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–With assistance from Jan-Patrick Barnert, Alice Gledhill and Julien Ponthus.
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